Cairney, Incorporated manufactures a specialized part used in internal combustion engines. The annual demand for the part is249,000 units. The facility has a practical capacity of 264,000 units annually. The company leased the current facility because facilitiescapable of manufacturing the unit require machines that can produce 66,000 units each. The annual cost of the facility is $1,013,760.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 unitb. Cost of excess capacity

To determine the cost per unit, we need to consider both fixed and variable costs. The fixed cost is…

Answered: a. What cost per unit should the cost…

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?

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Question

Cairney, Incorporated manufactures a specialized part used in internal combustion engines. The annual demand for the part is
249,000 units. The facility has a practical capacity of 264,000 units annually. The company leased the current facility because facilities
capable of manufacturing the unit require machines that can produce 66,000 units each. The annual cost of the facility is $1,013,760.
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 capacity

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