Every year Blue Industries manufactures 7,300 units of part 231 for use in its production cycle. The per unit costs of part 231 are asfollows:Direct materialsDirect laborVariable manufacturing overheadFixed manufacturing overheadTotal(a)$3.00Total relevant cost to make $11.00Net relevant cost to buy $8.00Cullumber, Inc., has offered to sell 7,300 units f part 231 to Blue for $33 per unit. If Blue accepts Cullumber's offer, its freed-upfacilities could be used to earn $10,700 in contribution margin by manufacturing part 240. In addition, Blue would eliminate 50% ofthe fixed overhead applied to part 231.10.00$32.00Calculate total relevant cost to make and net cost to buy.

Solution:Total relevant cost to make = Total variable costs + Avoidable fixed costNote : Total…

Answered: Every year Blue Industries manufactures…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

See similar textbooks

Similar questions

Han Products manufactures 22,000 units of part S-6 each year for use on its production line. At this level of activity, the cost per unit for part S-6 is: Direct materials Direct labor Variable manufacturing overhead Fixed manufacturing overhead Total cost per part $ 3.60 10.00 2.40 6.00 $ 22.00 An outside supplier has offered to sell 22,000 units of part S-6 each year to Han Products for $20 per part. If Han Products accepts this offer, the facilities now being used to manufacture part S-6 could be rented to another company at an annual rental of $72,000. However, Han Products has determined that two-thirds of the fixed manufacturing overhead being applied to part S-6 would continue even if part S-6 were purchased from the outside supplier. Required: What is the financial advantage (disadvantage) of accepting the outside supplier's offer?
Ahrends Corporation makes 44,000 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 $ 23.80 Direct labor 27.70 Variable manufacturing overhead 8.70 Fixed manufacturing overhead 39.70 Unit product cost $ 99.90 An outside supplier has offered to sell the company all of these parts it needs for $86.20 a unit. If the company accepts this offer, the facilities now being used to make the part could be used to make more units of a product that is in high demand. The additional contribution margin on this other product would be $286,000 per year. If the part were purchased from the outside supplier, all of the direct labor cost of the part would be avoided. However, $34.40 of the fixed manufacturing overhead cost being applied to the part would continue even if the part were purchased from the outside supplier. This fixed manufacturing overhead cost would be applied to the company's…
Scott Corporation produces a part for use in the production of one of its products. The per-unit costs associated with the annual production of 1,000 units of this part are as follows: Direct Materials $10.50 $24.00 Direct labor Variable factory overhead $5.50 Fixed factory overhead $12.00 Total Costs $52.00 $5,000 of the fixed factory overhead costs associated with the production of this product are common fixed costs. Larson Company has offered to sell 1,000 units of the same part to Scott Corporation for $42 per unit. Scott should: Select one: a. buy the part, because this would save $10.00 per unit. X b. buy the part, because this would save the company $5,000 annually. c. make the part, because this would save the company $5,000 annually. d. make the part, because this would save $2.00 per unit.
Damon Industries manufactures 15,000 components per year. The manufacturing costs of the components were determined as follows: Direct materials Direct labor Variable manufacturing overhead Fixed manufacturing overhead An outside supplier has offered to sell the component for $16. If Damon purchases the component from the outside supplier, the manufacturing facilities would be unused and could be rented out for $11,600. If Damon purchases the component from the supplier instead of manufacturing it, the effect on operating profits would be a: Multiple Choice O O $78,900 increase. $42,100 increase. $37,900 decrease. $ 129,000 20,500 60,000 80,000 $18,900 decrease.
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…
B. Smash Company manufactures professional paperweights and has been approached by a new customer with an offer to purchase 15,000 units at a per-unit price of P7.00.The new customer is geographically separated from Smash’s other customers, and existing sales will not be affected. Smash normally produces 82,000 units but plans to produce and sell only 65,000 units in the coming year. The normal sales price is P12.00 per unit. Unit cost information is as follows: Direct materials P 3.10 Direct labor 2.25 Variable overhead 1.15 Fixed overhead 1.80 Total P` 8.30 If Smash accepts the order, no fixed manufacturing activities will be affected because there…
Jade Ltd. manufactures a product, which regularly sells for $67.75. This product has the following costs per unit at the expected production of 47,500 units: Cost Amount Direct labour $20.00 Direct materials 10.50 Manufacturing overhead (36% is variable) 24.00 The company has the capacity to produce 52,250 units. A wholesaler has offered to pay $77 for 12,000 units. If Jade Ltd. accepts this special order, operating income would increase (decrease) by how much?
If the company buys the part it will still have to pay $1.50 per unit for the fixed manufacturing overhead costs. Instructions: Evaluate the two options and recommend Dala Furniture Company whether it should make or buy the 25,000 units of part D.
Please solve this one
please step by step solution.
Shine Engine Company manufacturers Part A which is used in several of its engine models. Monthly production costs for 1,000 units are as follows: Direct materials sh. 40,000 Direct labour 10,000 Variable overhead costs 30,000 Fixed overhead costs 20,000 Total costs 100,000 It is estimated that 10% of the fixed overhead costs assigned to Part A will no longer be incurred if the company purchases Part A from the outside supplier. The company has the option of purchasing the part from an outside supplier at sh. 85 per…
Please help me with this question

SEE MORE QUESTIONS

Recommended textbooks for you

FINANCIAL ACCOUNTING

Accounting

ISBN:

9781259964947

Author:

Libby

Publisher:

MCG

Accounting

ISBN:

9781337272094

Author:

WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.

Publisher:

Cengage Learning,

Accounting Information Systems

Accounting

ISBN:

9781337619202

Author:

Hall, James A.

Publisher:

Cengage Learning,

FINANCIAL ACCOUNTING

Accounting

ISBN:

9781259964947

Author:

Libby

Publisher:

MCG

Accounting

ISBN:

9781337272094

Author:

WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.

Publisher:

Cengage Learning,

Accounting Information Systems

Accounting

ISBN:

9781337619202

Author:

Hall, James A.

Publisher:

Cengage Learning,

Horngren's Cost Accounting: A Managerial Emphasis…

Accounting

ISBN:

9780134475585

Author:

Srikant M. Datar, Madhav V. Rajan

Publisher:

PEARSON

Intermediate Accounting

Accounting

ISBN:

9781259722660

Author:

J. David Spiceland, Mark W. Nelson, Wayne M Thomas

Publisher:

McGraw-Hill Education

Financial and Managerial Accounting

Accounting

ISBN:

9781259726705

Author:

John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting Principles

Publisher:

McGraw-Hill Education

SEE MORE TEXTBOOKS