Sheridan, 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 7 9 $27 Saran Company has contacted Sheridan with an offer to sell it 5400 wickets for $21 each. Of Sheridan's $9 per unit fixed cost, $5 per unit is unavoidable. Should Sheridan make or buy the wickets and why? Make because the cost savings is $16200 Make because the cost savings is $5400 Buy because the cost savings is $10800 O Buy because the cost savings is $5400
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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.Oat Treats manufactures various types of cereal bars featuring oats. Simmons Cereal Company has approached Oat Treats with a proposal to sell the company its top selling oat cereal bar at a price of $27,500 for 20,000 bars. The costs shown are associated with production of 20,000 oat bars currently. The manufacturing overhead consists of $3,000 of variable costs with the balance being allocated to fixed costs. Should Oat Treats make or buy the oat bars?Country Diner currently makes cookies for its boxed lunches. It uses 40,000 cookies annually in the production of the boxed lunches. The costs to make the cookies are: A potential supplier has offered to sell Country Diner the cookies for $0.85 each. If the cookies are purchased, 10% of the fixed overhead could be avoided. If Jason accepts the offer, what will the effect on profit be?
- 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 $6400Marigold, Inc. currently manufactures a wicket as its main product. The costs per unit are as follows: Direct materials and direct labor $11 Variable overhead Fixed overhead Total $24 Saran Company has contacted Marigold with an offer to sell it 5500 of the wickets for $18 each. If Marigold makes the wickets, variable costs $5 per unit is unavoidable. Should Marigold make or buy the wickets? Make; savings - $11000 Buy; savings - $16s00 Make; savings = $5500 Buy; savings = $5500Vaughn, Inc. currently manufactures a wicket as its main product. The costs per unit are as follows: Direct materials and direct labor $17 Variable overhead 5 Fixed overhead 8 Total $30 Saran Company has contacted Vaughn with an offer to sell it 6900 of the wickets for $24 each. If Vaughn makes the wickets, variable costs are $22 per unit. Fixed costs are $8 per unit; however, $5 per unit is unavoidable. Should Vaughn make or buy the wickets? Make; savings = $6900 Make; savings = $13800 Buy; savings = $6900 Buy; savings = $20700
- Sunland, Inc. currently manufactures a wicket as its main product. The costs per unit are as follows: Direct materials and direct labor $15 Variable overhead 5 Fixed overhead 8 Total $28 Saran Company has contacted Sunland with an offer to sell it 6500 of the wickets for $22 each. If Sunland makes the wickets, variable costs are $20 per unit. Fixed costs are $8 per unit; however, $5 per unit is unavoidable. Should Sunland make or buy the wickets? Make; savings = $6500 Make; savings = $13000 Buy; savings = $6500 Buy; savings = $19500Baird Electronics currently produces the shipping containers it uses to deliver the electronics products it sells. The monthly cost of producing 9,100 containers follows. $ 6,500 6,400 4,100 9,600 27,900 Unit-level materials Unit-level labor Unit-level overhead Product-level costs* 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 Baird for $2.60 each. Required a. Calculate the total relevant cost. Should Baird continue to make the containers? b. Baird could lease the space it currently uses in the manufacturing process. If leasing would produce $11,200 per month, calculate the total avoidable costs. Should Baird continue to make the containers? a. Total relevant cost Should Baird continue to make the containers? b. Total avoidable cost Should Baird continue to make the containers?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?
- 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?Limos Mfg. has been manufacturing furniture sets and is considering whether tomake or outsource its own seat cushions needed for its chairs. The expected priceof the cushions is P50 per unit.If it continue to produce the company would incur the following unit cost: Directmaterials P13, Direct Labor P15, Variable overhead 5, Fixed overhead (based onthe average production requirement of 10,000 units) P20 for a total of P53.Let us assume that materials and labor costs are expected to increase by 20% nextperiod. Factory overhead costs will remain the same, except that 40% of the fixedoverhead will be eliminated in case the company decides to buy the seat cushionsfrom other suppliers. Moreover, the facilities presently being used in the manufactureof seat cushions can be utilized to manufacture another part of the main product incase such facilities become vacant when the company decides to stop producing theseat cushions. The alternative use of resources would result into cost savings…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?