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The management of Cullumber Manufacturing Company is trying to decide whether to continue manufacturing a part or to buy it from an outside supplier. The part, called CISCO, is a component of the company's finished product. The following information was collected from the accounting records and production data for the year ending December 31, 2027. 1.8,000 units of CISCO were produced in the Machining Department. 2. Variable manufacturing costs applicable to the production of each CISCO unit were: direct materials $5.10, direct labor $4.88, indirect labor $0.45, utilities $0.44. 3. Fixed manufacturing costs applicable to the production of CISCO were: Cost Item Direct Allocated Total Depreciation $1,900 $920 $2,820 Property taxes 490 420 910 Insurance 890 620 1,510 $3,280 $1,960 5,240 All variable manufacturing and direct fixed costs will be eliminated if CISCO is purchased. Allocated costs will not be eliminated if CISCO is purchased. So if CISCO is purchased, the fixed manufacturing costs allocated to CISCO will have to be absorbed by other production departments. 4. The lowest quotation for 8,000 CISC units from a supplier is $87,390. 5. If CISCO units are purchased, freight and inspection costs would be $0.34 per unit, and receiving costs totaling $1,310 per year would be incurred by the Machining Department. (a) Prepare an incremental analysis for CISCO. (Enter negative amounts using either a negative sign preceding the number e.g. -45 or parentheses e.g. (45).) Direct material Direct labor Indirect labor Utilities Depreciation Property taxes Make CISCO Buy CISCO 12000 3600 3480 0 3520 i 2000 920 i 470 ° Insurance 660 0 Purchase 0 87390 i price Freight and 0 2720 i inspection Receiving 0 1310 costs Net Income Increase (Decrease)

The management of Cullumber Manufacturing Company is trying to decide whether to continue manufacturing a part or to buy it from an outside supplier. The part, called CISCO, is a component of the company's finished product. The following information was collected from the accounting records and production data for the year ending December 31, 2027. 1.8,000 units of CISCO were produced in the Machining Department. 2. Variable manufacturing costs applicable to the production of each CISCO unit were: direct materials $5.10, direct labor $4.88, indirect labor $0.45, utilities $0.44. 3. Fixed manufacturing costs applicable to the production of CISCO were: Cost Item Direct Allocated Total Depreciation $1,900 $920 $2,820 Property taxes 490 420 910 Insurance 890 620 1,510 $3,280 $1,960 5,240 All variable manufacturing and direct fixed costs will be eliminated if CISCO is purchased. Allocated costs will not be eliminated if CISCO is purchased. So if CISCO is purchased, the fixed manufacturing costs allocated to CISCO will have to be absorbed by other production departments. 4. The lowest quotation for 8,000 CISC units from a supplier is $87,390. 5. If CISCO units are purchased, freight and inspection costs would be $0.34 per unit, and receiving costs totaling $1,310 per year would be incurred by the Machining Department. (a) Prepare an incremental analysis for CISCO. (Enter negative amounts using either a negative sign preceding the number e.g. -45 or parentheses e.g. (45).) Direct material Direct labor Indirect labor Utilities Depreciation Property taxes Make CISCO Buy CISCO 12000 3600 3480 0 3520 i 2000 920 i 470 ° Insurance 660 0 Purchase 0 87390 i price Freight and 0 2720 i inspection Receiving 0 1310 costs Net Income Increase (Decrease)

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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The management of Cullumber Manufacturing Company is trying to decide whether to continue manufacturing a part or to buy it from an outside supplier. The part, called CISCO, is a component of the company's finished product. The following information was collected from the accounting records and production data for the year ending December 31, 2027. 1.8,000 units of CISCO were produced in the Machining Department. 2. Variable manufacturing costs applicable to the production of each CISCO unit were: direct materials $5.10, direct labor $4.88, indirect labor $0.45, utilities $0.44. 3. Fixed manufacturing costs applicable to the production of CISCO were: Cost Item Direct Allocated Total Depreciation $1,900 $920 $2,820 Property taxes 490 420 910 Insurance 890 620 1,510 $3,280 $1,960 5,240 All variable manufacturing and direct fixed costs will be eliminated if CISCO is purchased. Allocated costs will not be eliminated if CISCO is purchased. So if CISCO is purchased, the fixed manufacturing costs allocated to CISCO will have to be absorbed by other production departments. 4. The lowest quotation for 8,000 CISC units from a supplier is $87,390. 5. If CISCO units are purchased, freight and inspection costs would be $0.34 per unit, and receiving costs totaling $1,310 per year would be incurred by the Machining Department. (a) Prepare an incremental analysis for CISCO. (Enter negative amounts using either a negative sign preceding the number e.g. -45 or parentheses e.g. (45).) Direct material Direct labor Indirect labor Utilities Depreciation Property taxes Make CISCO Buy CISCO 12000 3600 3480 0 3520 i 2000 920 i 470 ° Insurance 660 0 Purchase 0 87390 i price Freight and 0 2720 i inspection Receiving 0 1310 costs Net Income Increase (Decrease)
Transcribed Image Text:The management of Cullumber Manufacturing Company is trying to decide whether to continue manufacturing a part or to buy it from an outside supplier. The part, called CISCO, is a component of the company's finished product. The following information was collected from the accounting records and production data for the year ending December 31, 2027. 1.8,000 units of CISCO were produced in the Machining Department. 2. Variable manufacturing costs applicable to the production of each CISCO unit were: direct materials $5.10, direct labor $4.88, indirect labor $0.45, utilities $0.44. 3. Fixed manufacturing costs applicable to the production of CISCO were: Cost Item Direct Allocated Total Depreciation $1,900 $920 $2,820 Property taxes 490 420 910 Insurance 890 620 1,510 $3,280 $1,960 5,240 All variable manufacturing and direct fixed costs will be eliminated if CISCO is purchased. Allocated costs will not be eliminated if CISCO is purchased. So if CISCO is purchased, the fixed manufacturing costs allocated to CISCO will have to be absorbed by other production departments. 4. The lowest quotation for 8,000 CISC units from a supplier is $87,390. 5. If CISCO units are purchased, freight and inspection costs would be $0.34 per unit, and receiving costs totaling $1,310 per year would be incurred by the Machining Department. (a) Prepare an incremental analysis for CISCO. (Enter negative amounts using either a negative sign preceding the number e.g. -45 or parentheses e.g. (45).) Direct material Direct labor Indirect labor Utilities Depreciation Property taxes Make CISCO Buy CISCO 12000 3600 3480 0 3520 i 2000 920 i 470 ° Insurance 660 0 Purchase 0 87390 i price Freight and 0 2720 i inspection Receiving 0 1310 costs Net Income Increase (Decrease)
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