Trifecta Distributors has decided to discontinue manufacturing its X Plus model. Currently, the company has 4,500 partially completed X Plus models on hand. The government has put a recall on a particular part in the X Plus model, so each base model must now be reworked to accommodate the style of the new part. The company has spent $110 per unit to manufacture these X Plus models to their current state. Reworking each X Plus model will cost $21 for materials and $20 for direct labor. In addition, $6 of variable overhead and $32 of allocated fixed overhead (relating primarily to depreciation of plant and equipment) will be allocated per unit. If Trifecta completes the X Plus models, it can sell them for $160 per unit. On the other hand, another manufacturer is interested in purchasing the partially completed units for $104 each and converting them into Z Plus models. Prepare a differential analysis per unit to determine if Trifecta should complete the X Plus models or sell them in their current state.
Trifecta Distributors has decided to discontinue manufacturing its X Plus model. Currently, the company has 4,500 partially completed X Plus models on hand. The government has put a recall on a particular part in the X Plus model, so each base model must now be reworked to accommodate the style of the new part. The company has spent $110 per unit to manufacture these X Plus models to their current state. Reworking each X Plus model will cost $21 for materials and $20 for direct labor. In addition, $6 of variable overhead and $32 of allocated fixed overhead (relating primarily to depreciation of plant and equipment) will be allocated per unit. If Trifecta completes the X Plus models, it can sell them for $160 per unit. On the other hand, another manufacturer is interested in purchasing the partially completed units for $104 each and converting them into Z Plus models. Prepare a differential analysis per unit to determine if Trifecta should complete the X Plus models or sell them in their current state.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Trifecta Distributors has decided to discontinue manufacturing its X Plus model. Currently, the company has 4,500 partially completed X Plus models on hand. The government has put a recall on a particular part in the X Plus model, so each base model must now be reworked to accommodate the style of the new part. The company has spent $110 per unit to manufacture these X Plus models to their current state. Reworking each X Plus model will cost $21 for materials and $20 for direct labor. In addition, $6 of variable
Transcribed Image Text:Trifecta Distributors has decided to discontinue manufacturing its X Plus model. Currently, the company has 4,500 partially completed X Plus models on hand. The government has put a recall on a particular part in the X Plus model, so
each base model must now be reworked to accommodate the style of the new part. The company has spent $110 per unit to manufacture these X Plus models to their current state. Reworking each X Plus model will cost $21 for materials
and $20 for direct labor. In addition, $6 of variable overhead and $32 of allocated fixed overhead (relating primarily to depreciation of plant and equipment) will be allocated per unit. If Trifecta completes the X Plus models, it can sell them
for $160 per unit. On the other hand, another manufacturer is interested in purchasing the partially completed units for $104 each and converting them into Z Plus models. Prepare a differential analysis per unit to determine if Trifecta
should complete the X Plus models or sell them in their current state.
Differential revenue per unit
Differential costs:
Materials
Direct labor
Variable overhead
Differential benefit per unit
Trifecta should
the X Plus models.
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