Vaughn, Inc. currently manufactures a wicket as its main product. Costs per unit are as follows: Direct materials and direct labor $11 Variable overhead Fixed overhead Total 5 8 $24 Saran Company has contacted Vaughn with an offer to sell it 6400 wickets for $18 each. Of Vaughn's $8 per unit fixed cost, $5 per unit is unavoidable. Should Vaughn make or buy the wickets and why? O Make because the cost savings is $12800 ◇ Buy because the cost savings is $6400 ○ Buy because the cost savings is $19200 ○ Make because the cost savings is $6400

Vaughn, Inc. currently manufactures a wicket as its main product. Costs per unit are as follows: Direct materials and direct labor $11 Variable overhead Fixed overhead Total 5 8 $24 Saran Company has contacted Vaughn with an offer to sell it 6400 wickets for $18 each. Of Vaughn's $8 per unit fixed cost, $5 per unit is unavoidable. Should Vaughn make or buy the wickets and why? O Make because the cost savings is $12800 ◇ Buy because the cost savings is $6400 ○ Buy because the cost savings is $19200 ○ Make because the cost savings is $6400

Managerial Accounting: The Cornerstone of Business Decision-Making

7th Edition

ISBN:9781337115773

Author:Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger

Publisher:Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger

Chapter7: Cost-volume-profit Analysis

Section: Chapter Questions

Problem 58P: Polaris Inc. manufactures two types of metal stampings for the automobile industry: door handles and...

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Polaris Inc. manufactures two types of metal stampings for the automobile industry: door handles and trim kits. Fixed cost equals 146,000. Each door handle sells for 12 and has variable cost of 9; each trim kit sells for 8 and has variable cost of 5. Required: 1. What are the contribution margin per unit and the contribution margin ratio for door handles and for trim kits? 2. If Polaris sells 20,000 door handles and 40,000 trim kits, what is the operating income? 3. How many door handles and how many trim kits must be sold for Polaris to break even? 4. CONCEPTUAL CONNECTION Assume that Polaris has the opportunity to rearrange its plant to produce only trim kits. If this is done, fixed costs will decrease by 35,000, and 70,000 trim kits can be produced and sold. Is this a good idea? Explain.
Nelly Technology manufactures a particular computer component. Currently, the costs per unit are asfollows:Direct material P 50Direct labor 500Variable overhead 250Fixed overhead 400Fur Inc. has obtained Nelly with a offer to sell 10,000 units of the component for P1,100 per unit. IfNelly accepts the proposal, P2,500,000 of the fixed overhead will be eliminated. Should Nelly makeor buy the component?
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Cox Electric makes electronic components and has estimated the following for a new design of one of Its products. Fixed Cost = $15,000 Material Cost per Unit = $0.19 Labor Cost per Unit = $0.14 MY NOTES ASK YOUR TEACHI Revenue per Unit = $0.69 Note that fixed cost is incurred regardless of the amount produced. Per-unit material and labor cost together make up the variable cost per unit. Assuming that Cox Electric sells all that it produce profit is calculated by subtracting the fixed cost and total variable cost from total revenue. If Cox Electric makes 43,100 units of the new product, what is the resulting profit (In whole dollars)? $
Yes Co. has the option to either further process product Y to produce Product Z. The selling price of product Y is $30 per unit and it costs $28 to produce each unit of product Y. Product Z would be sold for $55 and would require an additional $31 cost for production. What is the differential cost to produce product Z? a. $3 per unit b. $28 per unit c. $31 per unit d. $25 per unit
Jims Company produces 60,000 type-C earphones with the following costs: Direct Materials P13,000 Direct Labor 15,000 Variable Overhead 3,000 Fixed Overhead 7,000 None of Jims fixed overhead costs can be reduced, but another product could be made that would increase profit by P4,000 if the earphones were acquired externally. If cost minimization is the major consideration and the company would prefer to buy the earphones, what is the maximum external price that Jims would be willing to accept to acquire the 60,000 units externally?
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Wood Chuck Furniture currently manufactures rocking chairs as its main product. Each chair uses one seat cushion and one back CUSHIO and one back): Direct materials Direct labor Variable overhead Fixed overhead Total $ 1 10 Wood Chuck should 5 8 $24 Shepert Company has contacted Wood Chuck with an offer to sell it 5,000 sets of cushions for $18 each. If Wood Chuck buys the cushions, $2 of the fixed overhead per unit will be allocated to other products. Should Wood Chuck make or buy the cushions? buy to save $ per set. SUPPORT
The Borstal Company has to choose between two machines that do the same job but have different lives. The two machines have the following costs: Year Machine A $ Machine B $ 0 40,000.00 50,000.00 1 10,000.00 8,000.00 2 10,000.00 8,000.00 3 10,000.00 + replacement 8,000.00 4 8,000.00 + replacement These costs are expressed in real terms. 1. Suppose you are Borstal’s financial manager. If you had to buy one or the other machine and rent it to the production manager for the machine’s economic life, what annual rental payment would you have to charge? Assume a 6% real discount rate and ignore taxes. 2. Which machines should Borstal buy? 3. Suppose you actually do buy one of the machines and rent it to the production manager. How much would you actually have to charge in each future year if there is steady 8% per year inflation?
Division A makes a part that it sells to customers outside of the company. Data concerning this part appear below: Сaрacity 300,000 Demand 250,000 Selling price $135 VC per unit $78 Total FC $150,000 Division B would like to use the part manufactured by Division A in one of its products. Division B currently purchases a similar part made each period. If Division A sells to Division B rather than to outside customers, the variable cost be unit would be $5 lower. What should be the lowest acceptable transfer price from the perspective of Division A? an outside company for $38 per unit Division B requires 5,000 units of the part
Begonia uses part 87A in the production of color printers. Unit manufacturing costs for part 87A are: Direct materials $10 Direct labor 3 Variable overhead 2 Fixed overhead 4 Begonia uses 130,000 units of 87A per year. Benzyl Company has offered to sell Begonia 130,000 units of 87A per year for $18. Fixed overhead is unavoidable. Should Begonia make or buy the part? Group of answer choices It should make the part because it will save $390,000 over buying it. It should buy the part because it will save $390,000 over making it. It should make the part because it will save $1,250,000 over buying it. It should buy the part because it will save 1,250,000 over making it. It should buy the part because it will save $340,000 over making it.