Elroy Racers makes bicycles. It has always purchased its bicycle tires from the M. Wilson Tires at $25 each but is currently considering making the tires in its own factory. The estimated costs per unit of making the tires are as follows:Direct materials $8 Direct labor $5 Variable manufacturing overhead $7 The company’s fixed expenses would increase by $60,000 per year if managers decided to make the tire.(b)What qualitative factors should Elroy Racers consider in making this decision?

Qualitative Factors refer to the advantages or disadvantages of making a decision which cannot be…

Answered: What qualitative factors should Elroy…

Business

Accounting

What qualitative factors should Elroy Racers consider in making this decision?

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

See similar textbooks

Similar questions

To be profitable, a firm must recover its costs. These costs include both its fixed and its variable costs. One way that a firm evaluates at what stage it would recover the invested costs is to calculate how many units or how much in dollar sales is necessary for the firm to earn a profit. Consider the case of Blue Mouse Manufacturers: Blue Mouse Manufacturers is considering a project that will have fixed costs of $10,000,000. The product will be sold for $37.50 per unit, and will incur a variable cost of $11.25 per unit. Given Blue Mouse’s cost structure, it will have to sell units to break even on this project (QBEQBE).
Crane Company has decided to introduce a new product. The new product can be manufactured by either a capital-intensive method or a labor-intensive method. The manufacturing method will not affect the quality of the product. The estimated manufacturing costs by the two methods are as follows. Direct materials Direct labor Variable overhead Fixed manufacturing costs (a) Capital-Intensive $6.00 per unit $7.00 per unit $4.00 per unit $3,200,000 Crane' market research department has recommended an introductory unit sales price of $40.00. The selling expenses are estimated to be $622,000 annually plus $2.00 for each unit sold, regardless of manufacturing method. 1. Capital-intensive manufacturing method. 2. Labor-intensive manufacturing method. Break-even point in units Labor-Intensive $7.00 per unit $10.00 per unit $5.50 per unit Calculate the estimated break-even point in annual unit sales of the new product if Crane Company uses the: $2,028,500 Capital-Intensive Labor-Intensive
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 $ 41,000 $ 51,000 1 10,200 8,400 2 10,200 8,400 3 10,200+ replace 8,400 4 8,400 replace These costs are expressed in real terms. a. 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 that machine's economic life, what annual rental payment would you have to charge? Assume a 8% real discount rate and ignore taxes. Note: Do not round intermediate calculations. Enter your answers as a positive value rounded to 2 decimal places. b. Which machine should Borstal buy? c. If there is steady 6% per year inflation, what will be the annual rental payment for machine B for the second year? Note: Enter your answer as a positive value rounded to 2 decimal places. a. Machine A a. Machine B b. Which machine should Borstal buy? c. Year 2 rental payment…
Cox Electric makes electronic components and has estimated the following for a new design of one of its products: Fixed cost = $10,000 Material cost per unit = $ 0.15 Labor cost per unit = $ 0.10 Revenue per unit = $ 0.65 These data are given in the file CoxElectric. 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 Cox Electric sells all that it produces, profit is calculated by subtracting the fixed cost and total variable cost rom total revenue. Create a spreadsheet model and construct a 1-way table and determine the breakeven point (use intervals of 10,000 units). Group of answer choices 20,000 - 30,000 10,000 - 20,000 30,000 - 40,000 25,000 30,000 20,000
Wings Incorporated manufactures machine parts for aircraft engines. The CEO, Chucky Valters, was considering an offer from a subcontractor that would provide 2,400 units of product PQ107 for Valters for a price of $150,000. If Wings does not purchase these parts from the subcontractor it must produce them in-house with the following unit costs: Direct materials Direct labor Variable overhead Cost per Unit $31 19 8 In addition to the above costs, if Wings produces part PQ107, it would have a retooling and design cost of $9,800. The relevant costs of producing 2,400 units of product PQ107 internally are:
If the fixed cost becomes $1,250,000, due to the increase in rent and salaries, what would be the new break-even load factor? * JetX Is a company that produces hardware parts for airerafts. The company has an annual fixed cost of $1,000,000 the below table shows the company's costs, revemues, and profits at different levels of production. Please complete the below tabke, knowing that the varinble cost per unit of production is $250. Please use the table to answer the following six questions. Problem Fixed costs Total Total cost Total Profit (or los) Output (Hardware units per year) variable revenue cost $1,00,000 0 $1,000,000 0 -S1,000,000 10,000 15,000 $1,000,000 $4,500,000 20,000 25,000 30,000
Memex Corp. manufactures memory expansion boards for microcomputers. The average selling price of its finished product is $240 per unit. The average variable cost per unit is $160. Memex incurs fixed costs of $1,920,000 per year. c-1. What will be the company's profit or loss at 26,000 units of sales for a year? (Click to select) is $ c-2. What will be the company's profit or loss at 23,500 units of sales for a year? (Input the value as positive number.) ✓ (Click to select) $ Profit Loss
JTA Corp must decide whether to make or buy some of its components for the appliances it produces. The cost of producing 166,000 electrical cords for its appliances are as follows Direct materials 90,000 Direct Labor 32,000 Variable overhead 19,100 Fixed overhead 24,900 Instead of making the electrical cords at an average cost per unit of 10, the Company has an opportunity to buy the cords at 0 90 per unit. If the Company purchases the cords, all vanable costs are eliminated. What is the total relevant cost per unit in deciding either to buy or produce the component?
Big Seats has the capacity to produce 100,000 sofas per year but only produces 80,000 sofas per year. The sale price is $1,000 each. Direct materials equals $100 per sofa, direct labor equals $200 per sofa, and allocated overhead equals $100,000 per year. Buy & Large offers to buy an additional 2,000 sofas but is only willing to pay $800 per sofa. What is the additional operating income (loss) of accepting the offer? ENTER NEGATIVE NUMBERS WITH A "_" SIGN. DO NOT USE PARENTHESES. EXAMPLE: -1000
Having an issue with this problem. Thank you
A local company has two machines for producing wrenches. Each machine requires a full- time operator - regardless of production - specialized on that machine. The operator for Machine A costs $75,000 a year in fixed costs in salary and benefits. The operator for Machine B costs $62,000 a year in fixed costs in salary and benefits. The production costs of Machine A is $16. B is $20. (a) if the wrenches sell for $28, find the break-even point of each machine. (b) at what level of production do the two production machines cost the same. ( Answer it in excel)
The effect on operating income from making the part would be a