Cullumber Water Co. is a leading producer of greenhouse irrigation systems. Currently, the company manufactures the timer unitused in each of its systems. Based on an annual production of 52,000 timers, the company has calculated the following unit costs.Direct fixed costs include supervisory and clerical salaries and equipment depreciation.Direct materialsDirect laborVariable manufacturing overheadDirect fixed manufacturing overheadAllocated fixed manufacturing overheadTotal unit cost$1274954110 (30% salaries, 70% depreciation)Clifton Clocks has offered to provide the timer units to Cullumbet at a price of $36 per unit. If Cullumber accepts the offer, the currenttimer unit supervisory and clerical staff will be laid off (b1)Assume that if Cullumber Water accepts Clifton's offer, the company can use the freed-up manufacturing facilities tomanufacture a new line of growing lights. The company estimates it can sell 99,360 of the new lights each year at a price of $12.Variable costs of the lights are expected to be $9 per unit. The timer unit supervisory and clerical staff would be transferred tothis new product line. Calculate the total relevant cost to make the timer units and the net cost if they accept Clifton's offer.Total relevant cost to makeNet relevant cost if they accept Clifton's offer$$ (a1)Calculate the total relevant cost to make or buy the timer units. (Round answers to O decimal places, eg. 5,250.)Total relevant cost$Make$Buy

In this question, we have given the data to calculate the relevant cost to make and buy the timer…

Answered: ullumber Water Co. is a leading…

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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Cullumber Water Co. is a leading producer of greenhouse irrigation systems. Currently, the company manufactures the timer unit used in each of its systems. Based on an annual production of 52,000 timers, the company has calculated the following unit costs. Direct fixed costs include supervisory and clerical salaries and equipment depreciation. Direct materials Direct labor Variable manufacturing overhead Direct fixed manufacturing overhead Allocated fixed manufacturing overhead Total unit cost $12 7 4 9 541 10 (30% salaries, 70% depreciation) Clifton Clocks has offered to provide the timer units to Cullumbet at a price of $36 per unit. If Cullumber accepts the offer, the current timer unit supervisory and clerical staff will be laid off

(b1)
Assume that if Cullumber Water accepts Clifton's offer, the company can use the freed-up manufacturing facilities to
manufacture a new line of growing lights. The company estimates it can sell 99,360 of the new lights each year at a price of $12.
Variable costs of the lights are expected to be $9 per unit. The timer unit supervisory and clerical staff would be transferred to
this new product line. Calculate the total relevant cost to make the timer units and the net cost if they accept Clifton's offer.
Total relevant cost to make
Net relevant cost if they accept Clifton's offer
$
$

(a1)
Calculate the total relevant cost to make or buy the timer units. (Round answers to O decimal places, eg. 5,250.)
Total relevant cost
$
Make
$
Buy

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