Exercise 10-51 (Algo) Assigning Cost of Capacity (LO 10-5, 6) Middle Industries produces a sensor for use in manufacturing. It produces the sensor in a plant with an annual practical capacity C 91,000 units. The variable cost of the sensor is $201 per unit, and the fixed costs of the plant are $15,015,000 annually. Current and demand is 55,000 sensors. Middle Industries bought the plant because it was close to its other manufacturing facilities and was available for sale when they were searching for a location. Required: a. What cost per sensor should the cost system report to facilitate management decision making?
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- Middle Industries produces a sensor for use in manufacturing. It produces the sensor in a plant with an annual practical capacity of 75,000 units. The variable cost of the sensor is $185.00 per unit, and the fixed costs of the plant are $12,375,000 annually. Current annual demand is 55,000 sensors. Middle Industries bought the plant because it was close to its other manufacturing facilities and was available for sale when they were searching for a location. Required: What cost per sensor should the cost system report to facilitate management decision making? What is the cost of excess capacity? What cost per sensor would the cost system report if the smallest manufacturing plant that could be built was able to produce 75,000 sensors? What would be the cost of excess capacity?Cairney, Incorporated manufactures a specialized part used in internal combustion engines. The annual demand for the part is 265,000 units. The facility has a practical capacity of 280,000 units annually. The company leased the current facility because facilities capable of manufacturing the unit require machines that can produce 70,000 units each. The annual cost of the facility is $1,120,000. The variable cost of a part is $4. Required: a. What cost per unit should the cost system report to facilitate management decision making? Note: Round your answer to 2 decimal places. b. What is the cost of excess capacity? a. Cost per unit b. Cost of excess capacityPart P40 is a part used in the production of dehumidifiers at Pollock Corporation. The following costs and data relate to the production of Part P40: Number of parts produced annually Fixed costs Variable costs Total cost to produce 25,000 $44,000 $68,000 $112,000 Pollock Corporation can purchase the part from an outside supplier for $4.55 per unit. If they purchase from the outside supplier, 50% of the fixed costs would be avoided. If the company buys the part, what is the most it can spend per unit so that operating income is equal to $97,000? (Round the final answer to the nearest cent.) A. $3.00 B. $3.88 OC. $2.12 D. $1.55
- One component of communication equipment produced by Briggs Audio Systems is currently being purchased for P225. Management is studying the possibility of manufacturing that component. Annual usage of the part is 5,000 units. Fixed costs (all of which remains unchanged whether the part is made or purchased) are at P140,000 or P28 per unit. If to be produced, Variable costs are P95 per unit for materials; P55 per unit for labor; and P60 per unit for variable manufacturing overhead. Required: Which option would be advantageous and by how much? 1. Make is advantageous by P75,000 2. Buy is advantageous by P75,000 3. Make is advantageous by P65,000 4. Buy is advantageous by P65,000One component of communication equipment produced by Briggs Audio Systems is currently being purchased for P225. Management is studying the possibility of manufacturing that component. Annual usage of the part is 5,000 units. Fixed costs (all of which remains unchanged whether the part is made or purchased) are at P140,000 or P28 per unit. If to be produced, Variable costs are P95 per unit for materials; P55 per unit for labor; and P60 per unit for variable manufacturing overhead. Required: Which option would be advantageous and by how much? Make is advantageous by P75,000 Buy is advantageous by P75,000 Make is advantageous by P65,000 Buy is advantageous by P65,000 Group of answer choices 1 2 3 4Bruell Electronics Co. is developing a new product, surge protectors for high-voltage electrical flows. The cost information below relates to the product: Unit Costs Direct materials P 3.25 Direct labor 4.00 Distribution 0.75 The company will also be absorbing P120,000 of additional fixed costs associated with this new product. A corporate fixed charge of P20,000 currently absorbed by other products will be allocated to this new product. Bruell is subject to a tax rate of 30%. How many surge protectors (rounded to the nearest hundred) must Bruell Electronics sell at a selling price of P14 per unit to gain P30,000 additional income after taxes?
- Oahu Inc. is considering an investment in new equipment that will be used to manufacture a smartphone. The phone is expected to generate additional annual sales of 3,900 units at $311 per unit. The equipment has a cost of $362,700, residual value of $27,300, and an 8-year life. The equipment can only be used to manufacture the phone. The cost to manufacture the phone follows: Line Item Description Amount Cost per unit: Direct labor $53.00 Direct materials 207.00 Factory overhead (including depreciation) 35.50 Total cost per unit $295.50 Determine the average rate of return on the equipment. If required, round to the nearest whole percent.fill in the blank 1 of 1 %K- Your company is implementing a new production line for making solar panels. The company has two main attematves in setting up the production line eher use highly automated equipment or general-purpose equipment Cost information for these two options is as follows ALTERNATIVE Automated Equipment FIXED COST $900,000 per year General Purpose Equipment $150,000 per year At an annual requirement of 20,000 units, what does the company save per year by selecting the lower-cost option? OA $400,000 OB. $350,000 OC $150,000 OD. $250,000 VARIABLE COST $50 per und $100 per unitThe New England Soap Company is considering adding some processing equipment to the plant to aid in the removal of impurities from some raw materials. By adding the processing equipment, the firm can purchase lower-grade raw material at reduced cost and upgrade it for use in its products.Four different pieces of processing equipment with 15-year lives are being considered: A B C D Initial investment $8,500 $18,500 26,500 $30,000 Annual saving in materials costs 3,500 6,000 7,400 9,000 Annual operating cost 2,100 3,000 3,200 4,100 The company can obtain a 13% annual return on its investment in other projects and is willing to invest money on the processing equipment only as long as it can obtain 14% annual return on each increment of money invested. Which one, if any, of the alternatives should be selected? Use a challenger–defender rate of return analysis.
- Oahu Inc. is considering an investment in new equipment that will be used to manufacture a smartphone. The phone is expected to generate additional annual sales of 5,100 units at $276 per unit. The equipment has a cost of $521,700, residual value of $39,300, and an 8-year life. The equipment can only be used to manufacture the phone. The cost to manufacture the phone follows: Line Item Description Amount Cost per unit: Direct labor $47.00 Direct materials 182.00 Factory overhead (including depreciation) 31.60 Total cost per unit $260.60 Determine the average rate of return on the equipment. If required, round to the nearest whole percent.7. Equipment costing PIM is expected to produce 10. 000 pieces of pipes dur ing its economic life before being replaced. Annual production of this equipment is 2, 500 pipes. The equi pment' s scrap value is estimated at P50, 000. The cost of housing the equipment is P25, 000 per year. Costs of power and maintenance per unit are P9. 00 and P7. 00, respectively. Cost of labor is P35. 00 per unit. Use sinking fund method of depreciation with = 12% a. What is the total fixed cost? b. What is the variable cost per unit? c. What is the total cost of production per unit?E8-7A Make or Buy Eastside Company incurs a total cost of $120,000 in producing 10,000 units of a component needed in the assembly of its major product. The component can be purchased from an outside supplier for $11 per unit. A related cost study indicates that the total cost of the component includes fixed costs equal to 25% of the variable costs involved. a. Should Eastside buy the component if it cannot otherwise use the released capacity? Present your answer in the form of differential analysis. b. What would be your answer to requirement (a) if the released capacity could be used in a project that would generate $20,000 of contribution margin?