Managerial Accounting
6th Edition
ISBN: 9781259726972
Author: John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting Principles
Publisher: McGraw-Hill Education
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Chapter 10, Problem 2E
Exercise 23-5 Make or buy A1
Gelb Company currently manufactures 40,000 units per year of a key component for its manufacturing process. Variable costs are $1.95 per unit, fixed costs related to making this component are $65,000 per year, and allocated fixed costs are $58,500 per year. The allocated fixed costs are unavoidable whether the company makes or buys this component. The company is considering buying this component from a supplier for $3.50 per unit. Should it continue to manufacture the component, or should it buy this component from the outside supplier? Support your decisions with analysis of the data provided.
Check Increased cost to make, $3,000
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Calculate the total incremental cost of making 42,500 units and buying 42,500 units. Should it continue to manufacture the component, or should it buy this component from the outside supplier?
Question 17
Voltaic Electronics uses a standard part in the manufacture of different types of radios. The total cost of producing 35,000
parts is $105,000, which includes fixed costs of $50,000 and variable costs of $55,000. The company can buy the part from
an outside supplier for $2 per unit and avoid 20% of the fixed costs. Assume that the company can use the freed
manufacturing space to make another product that can earn a profit of $16,000. If Voltaic outsources, what will be the effect
on operating income?
O decrease of $10.000
increase of $16,000
increase of $11.000
decrease of $11,000.
G
Question 1
Vandelay Industries has been manufacturing its own touch screens for its cellular phones. The company is currently operating at 100% of capacity. Variable manufacturing overhead is charged to production
at the rate of 55% of direct labor cost. The direct materials and direct labor cost per unit to make the touch screens are $3.90 and $5.90, respectively. Normal production is 38,000 cellular phones per year.
A supplier offers to make the touch screens at a price of $13.59 per unit. If Vandelay Industries accepts the supplier's offer, all variable manufacturing costs will be eliminated, but the $36.860 of fixed
manufacturing overhead currently being charged to the touch screens will remain.
A) Prepare the incremental analysis for the decision to make or buy the touch screens.
B) Based on the quantitative factors, would you recommend that Vandelay Industries continue to make the touch screens, or buy them from the supplier? Are there any qualitative factors to consider aside…
Chapter 10 Solutions
Managerial Accounting
Ch. 10 - Prob. 1MCQCh. 10 - Prob. 2MCQCh. 10 - Prob. 3MCQCh. 10 - Prob. 4MCQCh. 10 - Prob. 5MCQCh. 10 - Prob. 1DQCh. 10 - Is nonfinancial information ever useful in...Ch. 10 - What is a relevant cost? Identify the two types of...Ch. 10 - Prob. 4DQCh. 10 - Prob. 5DQ
Ch. 10 - Prob. 6DQCh. 10 - Prob. 7DQCh. 10 - Prob. 8DQCh. 10 - Prob. 9DQCh. 10 - Prob. 10DQCh. 10 - Explain how a price-setter differs from a...Ch. 10 - Prob. 12DQCh. 10 - Prob. 1QSCh. 10 - Prob. 2QSCh. 10 - Prob. 3QSCh. 10 - Prob. 4QSCh. 10 - Prob. 5QSCh. 10 - Prob. 15QSCh. 10 - Prob. 6QSCh. 10 - Prob. 7QSCh. 10 - Prob. 10QSCh. 10 - Prob. 8QSCh. 10 - Prob. 9QSCh. 10 - Prob. 11QSCh. 10 - Prob. 12QSCh. 10 - Prob. 13QSCh. 10 - Prob. 14QSCh. 10 - Prob. 16QSCh. 10 - Prob. 17QSCh. 10 - Prob. 18QSCh. 10 - Raju is & price-taker in a competitive product...Ch. 10 - Prob. 20QSCh. 10 - Prob. 21QSCh. 10 - Prob. 1ECh. 10 - Exercise 23-5 Make or buy A1 Gelb Company...Ch. 10 - Prob. 3ECh. 10 - Prob. 4ECh. 10 - Prob. 5ECh. 10 - Prob. 6ECh. 10 - Exercise 23-11 Sales mix A1 Childress Company...Ch. 10 - Prob. 8ECh. 10 - Prob. 9ECh. 10 - Prob. 10ECh. 10 - Prob. 11ECh. 10 - Prob. 12ECh. 10 - Prob. 13ECh. 10 - Exercise 23-3 Accept new business or nor...Ch. 10 - Prob. 15ECh. 10 - Prob. 1PSACh. 10 - Prob. 2PSACh. 10 - Prob. 3PSACh. 10 - Prob. 4PSACh. 10 - Prob. 5PSACh. 10 - Prob. 6PSACh. 10 - Prob. 1PSBCh. 10 - Prob. 2PSBCh. 10 - Prob. 3PSBCh. 10 - Prob. 4PSBCh. 10 - Prob. 5PSBCh. 10 - Prob. 6PSBCh. 10 - Prob. 10SPCh. 10 - Assume Apple is designing a new smartphone. Each...Ch. 10 - Prob. 2AACh. 10 - Assume Samsung is designing a new smartphone. Each...Ch. 10 - Prob. 1BTNCh. 10 - Prob. 2BTNCh. 10 - Prob. 3BTNCh. 10 - Prob. 4BTNCh. 10 - Prob. 5BTNCh. 10 - Prob. 6BTN
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- Provide answer in table format Gelb Company currently manufactures 44,000 units per year of a key component for its manufacturing process. Variable costs are $6.25 per unit, fixed costs related to making this component are $77,000 per year, and allocated fixed costs are $61,500 per year. The allocated fixed costs are unavoidable whether the company makes or buys this component. The company is considering buying this component from a supplier for $3.70 per unit. Calculate the total incremental cost of making 44,000 units and buying 44,000 units. Should it continue to manufacture the component, or should it buy this component from the outside supplier?arrow_forwardQUESTION 28 Applesoft produces tablets, laptops and televisions. Applesoft typically sells 1,000 tablets a year. The tablet information is as follows: Selling price per unit Direct material cost per unit Direct labor cost per unit Total allocated overhead (1/4 avoidable if eliminate tablets) $60 $30 $15 $50,000 One fourth of the allocated overhead would be avoidable if the tablets were eliminated. How much would Operating Income change by if Applesoft were to eliminate the tablets? Be sure to include "-" in front of your amount if net income will decrease.arrow_forwardQuestion 45 Assume a division of HP Inc currently makes 50,000 circuit boards per year used in producing diagnostic electronic instruments at the cost of 150 per board, considering of variable costs per unit of $35 and feed costs per unit of $15. Further, assume Sarmina Corporation offers to sell HP the 50.000 circuit boards for $50 each if HP accepts this offer the facilities currently used to make the boards could be rented to one of HP's suppliers for $75,000 per year. In addition, $8 per unit of the fixed overhead applied to the circuit boards would be totally eliminated. Should HP outsource this component from Sanmina Corporation Support your answer with relevant cost calculations. Make-or-Buy) Decision.arrow_forward
- Question 3 Schopp Inc. has been manufacturing its own shades for its table lamps. The company is currently operating at 100% of capacity, and variable manufacturing overhead is charged to production at the rate of 70% of direct labor cost. The direct materials and direct labor cost per unit to make the lamp shades are $4 and $5, respectively. The fixed manufacturing overhead is $45,000. Normal production is 40,000 table lamps per year. A supplier offers to make the lamp shades at a price $12.75 per unit. If Schopp Inc. accepts the supplier's offer, all variable manufacturing costs will be eliminated, but the fixed manufacturing overhead currently being charged to the lamp shades will have to be absorbed by other products. Instructions (a) Prepare the incremental analysis for the decision to make or buy the lamp shades. (b) Should Schopp Inc. buy the lamp shades? (c) Would you answer be different in (b) if the productive capacity released by not making the lamp shades could be used to…arrow_forward18arrow_forward12 Division P of the Nyers Company makes a part that can either be sold to outside customers or transferred internally to Division Q for further processing. Annual data relating to this part are as follows: Annual production capacity 80,000 units Selling price of the item to outside customers $35 Variable cost per unit $23 Fixed cost per unit $5 Division Q of the Nyers Company requires 15,000 units per year and is currently paying an outside supplier $33 per unit. If outside customers demand only 50,000 units per year, then what is the lowest acceptable transfer price from the viewpoint of the selling division? A. $35 В. $33 C. $28 D. $23 E. None of the abovearrow_forward
- 2 Division Z of a company produces a component that it currently sells to outside customers for P20 per unit. At its current level of production, which is 60% of capacity, Division Z’s fixed cost of producing this component is P5 per unit and its variable cost is P12 per unit. Division Y of the same company would like to purchase this component from Division Z for P10. Division Z has enough excess capacity to fill Division Y’s requirements. The managers of both divisions are compensated based upon reported profits. Which of the following transfer prices will maximize total company profits and be most equitable to the managers of Division Y and Division Z? Group of answer choices P22 per unit. P21 per unit. There are two possible choices P17 per unit. P11 per unit. P15 per unitarrow_forward6arrow_forwardQuestion 21 Fox Company has just received an unexpected order from a customer for 1,000 units of a new product. The product will have total variable costs of $15.00 per unit. Fox Company will have to rent a machine for $10,000, pay overtime amounting to $5,000 to a supervisor to handle this order, and fixed packaging and shipping costs of $2,000 for this order. The minimum (floor) price per unit that Fox Company should charge for this order is: Select one: a. $15 b. $30 c. $32 d. $25arrow_forward
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