Donellan Company produces a special gear used in automatic transmissions. Each gear sells for $30, and the company sells approximately 500,000 gears each year. Unit cost data for the year follows: Direct material Direct labor $9.00 $8.00 Other costs: Variable Fixed Manufacturing $3.00 $7.00 Distribution $5.00 $3.00 Donellan has received an offer from a foreign manufacturer to purchase 25,000 gears. Domestic sales would be unaffected by this transaction. If the offer is accepted, variable distribution costs will increase $1.00 per gear for insurance, shipping, and import duties. The relevant unit cost to a pricing decision on this offer is: a) $24.00 b) $20.00 c) $26.00 d) $18.00

Hatch Manufacturing produces multiple machine parts. The theoretical cycle time for one of its products is 65 minutes per unit. The budgeted conversion costs for the manufacturing cell dedicated to the product are 12,960,000 per year. The total labor minutes available are 1,440,000. During the year, the cell was able to produce 0.6 units of the product per hour. Suppose also that production incentives exist to minimize unit product costs. Required: 1. Compute the theoretical conversion cost per unit. 2. Compute the applied conversion cost per minute (the amount of conversion cost actually assigned to the product). 3. Discuss how this approach to assigning conversion cost can improve delivery time performance. Explain how conversion cost acts as a performance driver for on-time deliveries.

Gadubhai

Specter Company makes 20,000 units per year of a part it uses in the products it manufactures.The unit product cost of this part is computed as follows:Direct materials $25.10Direct labour 18.20Variable manufacturing overhead 2.40Fixed manufacturing overhead 13.40Unit product cost $56.70An outside supplier has offered to sell the company all these parts it needs for $56.00 a unit. Ifthe company accepts this offer, the facilities now being used to make the part could be used tomake more units of a product that is in high demand. The additional contribution margin on thisother product would be $50,000 per year.If the part were purchased from the outside supplier, all the direct labour cost of the part wouldbe avoided. However, $5.10 of the fixed manufacturing overhead cost being applied to the partwould continue even if the part were purchased from the outside supplier. This fixedmanufacturing overhead cost would be applied to the company's remaining products.Required:Part a:Calculate…