Which alternative is more attractive to Terry Inc, make or buy the machine parts? 4. What strategic considerations likely bear on this make vs buy decision?
Q: Millennium Printers Inc. manufactures color laser printers. Model L-1819 presently sells for $150…
A: Working Note; Reduction in time taken by labor=960minutes=0.15 minute
Q: Mohave Corp. is considering outsourcing production of the umbrella tote bag included with some of…
A: Solution:- 1)Computation of the difference in cost between making and buying the umbrella tote bag…
Q: Perez Electronics currently produces the shipping containers it uses to deliver the electronics…
A: a. Total relevant cost = Unit-level materials + Unit-level labor + Unit-level overhead +…
Q: Rough N' Tough (RNT) manufactures outdoors accessories. Management is considering producing the…
A: Make or buy is one of the decision making analysis that helps an entity to decide if it should make…
Q: Make or Buy Terry Incorporated manufactures machine parts for aircraft engines. CEO Bucky Walters is…
A: Variable Cost:A variable cost is an expense that tends to increase or decrease with the changes in…
Q: Frannie Fans currently manufactures ceiling fans that include remotes to operate them. The current…
A: Hence, the change in income when fixed cost is unavoidable is $30,120. There is a decrease in income…
Q: Frannie Fans currently manufactures ceiling fans that include remotes to operate them. The current…
A: Net income is the amount of money earned by the entity after deducting the expenses from the…
Q: Mohave Corporation is considering outsourcing production of the umbrella tote bag included with some…
A: Differential cost refers to the difference between different cost alternatives. Differential costs…
Q: Baird Electronics currently produces the shipping containers it uses to deliver the electronics…
A: a. Total relevant cost = Material + Labor + overhead + Product level cost =6500+6400+4100+9600*1/3 =…
Q: oration makes 42,000 tiny wheels to be used in the production of ts Beautiful Product. The average…
A: The make or buy decision is a business strategy concept that involves a company deciding whether to…
Q: What would be the impact on short-term operating income if the company were to accept the offer from…
A: Computation of impact on short - term operating income , if the company accept this offer from the…
Q: Orion Inc. needs 10,000 parts to use in its production cycle. Venus has offered to sell the parts to…
A: Sunk costs refers to those sum of money that has already been spent and which cannot be recovered.…
Q: ncroft currently manufactures a subcomponent that is used in its main product. A supplier has…
A: Short-term profit alone does not provide a comprehensive view of a company's overall financial…
Q: A large electronics manufacturer is considering outsourcing the manufacturing of a diaphragm used in…
A: Calculation of the number of diaphragms to make the manufacturing the part in-house option least…
Q: Futura Company purchases the 74,000 starters that it installs in its standard line of farm tractors…
A: The "make or buy" concept in cost management involves deciding whether to produce a product or…
Q: Vernon Electronics currently produces the shipping containers it uses to deliver the electronics…
A: Buy cost is the cost of purchasing the product from outside.Make cost is the cost of making/…
Q: Mohave Corporation is considering outsourcing production of the umbrella tote bag included with some…
A: The relevant cost is the cost which differs between the two alternatives and which is avoidable. If…
Q: Mohave Corporation is considering outsourcing production of the umbrella tote bag included with some…
A: Solution:-The differential analysis is performed when two alternatives are available within the…
Q: Sterling Industries produces machine parts as a contract provider for a large manufacturing company…
A:
Q: -irect materials -irect labor ariable manufacturing overhead ixed manufacturing overhead $9.50 $8.50…
A: Solution : Financial advantage or disadvantage from making is based on the difference of relevant…
Q: The Molding Division of Cotwold Company manufactures a plastic casing used by the Assembly Division.…
A: The transfer price is the price at which the units are transferred from one department to another in…
Q: Futura Company purchases the 66.000 starters that it installs in its standard line of farm tractors…
A: The differential analysis is performed to compare the different alternatives available with the…
Q: Frannie Fans currently manufactures ceiling fans that include remotes to operate them. The current…
A: MAKE OR BUY DECISION The make-or-buy decision is choosing between manufacturing a product within a…
Q: Finch Electronics currently produces the shipping containers it uses to deliver the electronics…
A: When choosing whether to create a product domestically or purchase it from a third party, a…
Q: Vista Company manufactures electronic equipment. It currently purchases the special switches used in…
A: Break even point is the point where both cost and revenue should be equal, it means there is no…
Q: Lakeside Incorporated produces a product that currently sells for $42 per unit. Current production…
A: Lets understand the basics.When special order condition arises then management need to choose…
Q: repare an incremental analysis showing whether the company should make or buy the switches. (Enter…
A: calculation for additional cost incurred are as follows:
Q: Mohave Corporation is considering outsourcing production of the umbrella tote bag included with some…
A: Make or buy is the differential analysis which helps the entity to decide whether to make the goods…
Q: Futura Company purchases the 66,000 starters that it installs in its standard line of farm tractors…
A: The differential analysis is performed to compare the different alternatives available to the…
Q: Millennium Printers Inc. manufactures color laser printers. Model L-1819 presently sells for $150…
A: Target cost is determined by reducing sales price with required return on sales
Q: Daily Kneads, Inc., is considering outsourcing one of its many products rather than making it…
A: Make or Buy Decision: The process of deciding whether to produce a product or service in-house or to…
Q: A manufacturer produces hacksaw blades. Recently, the manufacturer has decided to enhance its…
A: This pertains to relevant cost analysis. Relevant costs are those costs that change when a decision…
Q: Tool Time manufactures carpenter-grade screwdrivers. The company is trying to decide whether to…
A: Manufacturing company manufacture products in their unit. Company cost determines the cost of each…
Q: Adams Electronics currently produces the shipping containers it uses to deliver the electronics…
A: The relevant costs are the avoidable costs that can be ignored if the alternative is not chosen. The…
Q: which option is advantageous and by how much
A: Purchase price per unit P320 Fixed manufacturing overhead per unit P130 Total cost of buying the…
Q: ridgeport Racers makes bicycles. It has always purchased its bicycle tires from the Cullumber Tires…
A: Relevant Cost: Relevant costs are the expected cost which are different for every alternative course…
Q: Required a. Calculate the total relevant cost. Should Campbell continue to make the containers? b.…
A: A make-or-buy choice is made while deciding whether to manufacture a product internally or to buy it…
Q: Jordan Electronics currently produces the shipping containers it uses to deliver the electronics…
A: A make-or-buy choice is made while deciding whether to manufacture a product internally or to buy it…
Q: Stan Fawcett's company currently purchases a gear assembly from Salt Lake Supply, Inc., at $3.80 per…
A: I can't directly generate the graph using a drawing tool here, but I can describe it for you which…
Q: Vista Company manufactures electronic equipment. It currently purchases the special switches used in…
A: Break-even point = Fixed Cost/Contribution per unit,At Indifferent point, totalcost of both machines…
Terry Inc. manufactures machine parts for aircraft engines. CEO Bucky Walters is considering an offer from a subcontractor to provide 2,000 units of product OP89 for $120,000. If Terry does not purchase these parts from the subcontractor, it must continue to produce them in-house with these costs:
Cost per unit
($)
Direct Materials 28
Direct Labor 18
Variable Overhead 16
Allocated Fixed Overhead 4
Required
3. Which alternative is more attractive to Terry Inc, make or buy the machine parts?
4. What strategic considerations likely bear on this make vs buy decision? (at least 2 considerations)
Step by step
Solved in 3 steps with 2 images
- 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?Required information (The following information applies to the questions displayed below} Each of the following situations is independent: Make vs. Buy (Sourcing Decision) Eggers Company needs 27,000 units of a part to use in producing one of its products. If Eggers buys the part from McMillan Company for $110 instead of making it, Eggers will not use the released facilities in another manufacturing activity. Forty percent of the fixed overhead will continue irrespective of CEO Donald Mickey's decision. The cost data are as follows: Cost to make the part: Direct materials $ 42 18 26 30 Direct labor Variable overhead Fixed overhead $116 Required: 1. Determine which alternative is more attractive to Eggers, and by what amount. Alternative Saving Make the part per unitWaterways has discovered that a small fitting it now manufactures at a unit cost of $1.00 could be bought elsewhere for $0.81 per unit. Waterways has unit fixed manufacturing costs of $0.20 that cannot be eliminated by buying this unit. Waterways needs 465,000 of these units each year.If Waterways decides to buy rather than produce the small fitting, it can devote the machinery and labor to making a timing unit it now buys from another company. Waterways uses approximately 400 of these units each year. The cost of the unit is $12.33. To aid in the production of this unit, Waterways would need to purchase a new machine at a cost of $2,344, and the unit cost of producing the units would be $9.40. Without considering the possibility of making the timing unit, evaluate whether Waterways should buy or continue to make the small fitting. The company should (make or buy?) the fitting. Incremental cost / (savings) will be
- Vista Company manufactures electronic equipment. It currently purchases the special switches used in each of its products from an outside supplier. The supplier charges Vista $5.20 per switch. Vista 's CEO is considering purchasing either machine A or machine B so the company can manufacture its own switches. The projected data are as follows: Machine A Machine B Annual fixed costs $ 582, 450 $ 792, 100 Variable cost per switch 1.67 0.75 Required: 1. For each machine, what is the minimum number of switches that Vista must make annually for total costs to equal outside purchase cost? 2. What volume level would produce the same total costs regardless of the machine purchased? 3. What is the most profitable alternative for producing 230,000 switches per year and what is the total cost of that alternative?Rooney Electronics currently produces the shipping containers it uses to deliver the electronics products it sells. The monthly cost of producing 9,100 containers follows. Unit-level materials Unit-level labor Unit-level overhead Product-level costs* $ 5,200 6,500 3,600 9,300 26,600 Allocated facility-level costs *One-third of these costs can be avoided by purchasing the containers. Russo Container Company has offered to sell comparable containers to Rooney for $2.70 each. Required a. Calculate the total relevant cost. Should Rooney continue to make the containers? b. Rooney could lease the space it currently uses in the manufacturing process. If leasing would produce $11,500 per month, calculate the total avoidable costs. Should Rooney continue to make the containers? a. Total relevant cost Should Rooney continue to make the containers? b. Total avoidable cost Should Rooney continue to make the containers?The Rosa model of Mohave Corporation is currently manufactured as a very plain umbrella with no decoration. The company is considering changing this product to a much more decorative model by adding a silk-screened design and embellishments. A summary of the expected costs and revenues for Mohave's two options follows: Estimated demand Estimated sales price Estimated manufacturing cost per unit Direct materials Direct labor Variable manufacturing overhead Fixed manufacturing overhead Unit manufacturing cost Additional development cost Rosa Umbrella 29,000 units $31.00 $ 21.50 4.50 3.50 6.00 $ 35.50 Decorated Umbrella 29,000 units $ 41.00 $ 23.50 7.00 5.50 6.00 $ 42.00 $ 12,000 Required: 1. Determine the increase or decrease in profit if Mohave sells the Rosa Umbrella with the additional decorations. 2. Should Mohave add decorations to the Rosa umbrella? 3-a.Suppose the higher price of the decorated umbrella is expected to reduce estimated demand for this product to 27,000 units.…
- Pharoah 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) Pharoah' market research department has recommended an introductory unit sales price of $28.00. The selling expenses are estimated to be $432,000 annually plus $2.00 for each unit sold, regardless of manufacturing method. Capital-Intensive $4.00 per unit $5.00 per unit $3.00 per unit $2,284,000 Calculate the estimated break-even point in annual unit sales of the new product if Pharoah Company uses the: 1. Capital-intensive manufacturing method. Labor-intensive manufacturing method. 2. Labor-Intensive $4.50 per unit $7.00 per unit $4.00 per unit $1,437,000 Break-even point in units Capital-Intensive Labor-IntensiveMo Furniture manufactures a frame for use in its production of sofas. When 10,000 frames are produced, the costs per unit are: Direct materials $ 12 Direct manufacturing labor 60 Variable manufacturing overhead 24 Fixed manufacturing overhead 32 Total $128 A company has offered to sell Mo Furniture 10,000 sofa frames for $120 per unit. Fixed manufacturing overhead of $20 per unit used to make the frame could be eliminated if the frames were purchased instead of made. What is the relevant cost per unit to make the frame in this make or buy decision?Thornton Electronics currently produces the shipping containers It uses to deliver the electronics products It sells. The monthly cost of producing 9,100 containers follows. Unit-level materials Unit-level labor Unit-level overhead Product-level costs* Allocated facility-level costs $ 5,100 6,400 3,300 9,900 28,000 *One-third of these costs can be avoided by purchasing the containers. Russo Container Company has offered to sell comparable containers to Thornton for $2.60 each. Required a. Calculate the total relevant cost. Should Thornton continue to make the containers? b. Thornton could lease the space it currently uses in the manufacturing process. If leasing would produce $12,100 per month, calculate the total avoidable costs. Should Thornton continue to make the containers? a. Total relevant cost a. Should Thornton continue to make the containers? b. Total avoidable cost b. Should Thornton continue to make the containers?
- Frannie Fans currently manufactures ceiling fans that include remotes to operate them. The current cost to manufacture 10,320 remotes is as follows: Direct materials Direct labor Variable overhead Fixed overhead Total Cost $ 67,080 $ 56,760 $ 30,960 $ 51,600 $ 206,400 Frannie is approached by Lincoln Company, which offers to make the remotes for $18 per unit. Required: 1. Compute the difference in cost per unit between making and buying the remotes if none of the fixed costs can be avoided. What is the change in net income, if Frannie Fans buys the remotes? 2. Compute the difference in cost per unit between making and buying the remotes if $20,640 of the fixed costs can be avoided. What is the change in net income, if Frannie Fans buys the remotes? 3. What is the change in net income if fixed cost of $20,640 can be avoided and Frannie could rent out the factory space no longer in use for $20,640?Mighty Safe Fire Alarm is currently buying 58,000 motherboards from MotherBoard, Inc., at a price of $63 per board. Mighty Safe is considering making its own boards. The costs to make the board are as follows: direct materials, $31 per unit; direct labor, $10 per unit; and variable factory overhead, $14 per unit. Fixed costs for the plant would increase by $89,000. Which option should be selected and why? Oa. make, $464,000 increase in profits Ob. buy, $89,000 increase in profits Oc. make, $375,260 increase in profits Od. buy, $375,260 increase in profitsBlossom Company must decide whether to make or buy some of its components. The costs of producing 62,600 switches for its generators are as follows. Direct materials $29,800 Direct labor $29,940 Variable overhead Fixed overhead Instead of making the switches at an average cost of $2.90 ($181,540 ÷ 62,600), the company has an opportunity to buy the switches at $2.74 per unit. If the company purchases the switches, all the variable costs and one-fourth of the fixed costs will be eliminated. (a) Direct materials Direct labor Variable manufacturing costs Fixed manufacturing costs Purchase price Total cost $45,400 $76,400 Prepare an incremental analysis showing whether the company should make or buy the switches. (Enter negative amounts using either a negative sign preceding the number e.g. -45 or parentheses e.g. (45).) Net Income Increase (Decrease) Senter a dollar amount enter a dollar amount enter a dollar amount enter a dollar amount enter a dollar amount Senter a total amount Make…
