Day Star collected the following information:Cost to buy one unitProduction costs per unit:Direct materialsDirect labourVariable overheadTotal fixed overheadDay Star can sell 25,000 units per year, at $80 each. The company also has an offer from a subsidiary to rent its plant facilities for$2,000,000. The fixed overhead will be incurred in each alternative, but there will be a savings of $150,000 in the fixed costsunder the renting alternative.A) buyBased on the above information only, should Day Star make or buy the product or rent its facilities out?B) make$22$16$2$360,000C) either make or buy - indifferent$48D) rent the facilities to the subsidiaryE) either make or rent - indifferent

The company evaluates the alternatives based on cost and benefit analysis. For example, en entity…

Answered: Day Star collected the following…

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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Mighty Safe Fire Alarm is currently buying 61,000 motherboards from MotherBoard, Inc. at a price of $63 per board. Mighty Safe is considering making its own motherboards. The costs to make the motherboards are as follows: direct materials, $34 per unit; direct labor, $11 per unit; and variable factory overhead, $14 per unit. Fixed costs for the plant would increase by $80,000. Which option should be selected and why? a.make, $244,000 increase in profits b.buy, $164,090 more in profits c.buy, $80,000 more in profits d.make, $164,090 increase in profits
Adams Electronics currently produces the shipping containers it uses to deliver the electronics products it sells. The monthly cost of producing 9,300 containers follows. Unit-level materials Unit-level labor Unit-level overhead Product-level costs* Allocated facility-level costs $5,900 6,200 3,500 *One-third of these costs can be avoided by purchasing the containers. Russo Container Company has offered to sell comparable containers to Adams for $2.60 each. Required X Answer is complete but not entirely correct. $ 19,300 Yes $ 24,180 X No 11,100 26,900 a. Calculate the total relevant cost. Should Adams continue to make the containers? b. Adams could lease the space it currently uses in the manufacturing process. If leasing would produce $11,800 per month, calculate the total avoidable costs. Should Adams continue to make the containers? a. Total relevant cost a. Should Adams continue to make the containers? b. Total avoidable cost b. Should Adams continue to make the containers?
Southfield Division offers its product to outside markets for $134. It incurs variable costs of $59 per unit and fixed costs of $148,500 per month based on monthly production of 23,900 units. Northfield Division can acquire the product from an alternate supplier for $139 per unit or from Southwest Division for a transfer price of $134 plus $6 per unit in transportation costs. Required: a. What are the costs and benefits of the alternatives available to Southfield Division and Northfield Division with respect to the transfer of Southfield Division's product? Assume that Southfield Division can market all that it can produce. b. How would your answer change if Southfield Division had idle capacity sufficient to cover all of Northfield Division's needs? a. Net benefit b. Net benefit per unit per unit
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Dunne Limited manufactures a standard model of garden gate. The selling price of a gote is €150. Variable costs of manufacture are C60. During the 20X5 financial year, the company expects to incur fixed production costs of €90,000 and fixed selling and administration overheads of €31,500. How many garden gates will the company have to sell in order to break even (to nearest whole unit)? Select one: O o. 1,000 units O b. 2,025 units O. 1,350 units Od. 350 units
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Mighty Safe Fire Alarm is currently buying 57,000 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, $33 per unit; direct labor, $12 per unit; and variable factory overhead, $15 per unit. Fixed costs for the plant would increase by $90,000. Which option should be selected and why? Oa. a. buy, $90,000 increase in profits Ob. make, $80,940 increase in profits c. make, $171,000 increase in profits Od. buy, $80,940 increase in profits
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Company E has two divisions, Division A and Division B. Division A is currently buying Component X from an external seller for $13. Division B produces Component X and has excess capacity. Using the following data, what would the transfer price per unit if Division A purchased Component X from Division B at the cost plus assuming 25% transfer price? • Variable cost per unit $6.38 Fixed cost per unit 1.13 • Division B sales price of Component X 14.50

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