Exercise 16.18LO 16-2, 16-3The make or buy decision Redbud Company uses a certain part in its manufacturing process that it buys from an outside supplier for $36 per part plus another $5 for shipping and other purchasing-related costs. The company will need 18,000of these parts in the next year and is considering making the part internally. After performing a capacity analysis, Redbud determined that it has sufficient unused capacity to manufacture the 18,000 parts but would need to hire a manager at anannual salary of $54,000 to oversee this production activity. Estimated production costs are determined to be as follows:Direct material..Direct labor.Variable overhead.Fixed overhead (includes manager at $4 per unit).Total unit cost..Required:a. Identify the relevant costs to make this part internally.b. Should Redbud produce the part or continue to buy it from the outside supplier?c. What other factors are important to this decision?$231058$46page 637

Step 1:a) The relevant costs to make each part internally are the factors influencing the decision.…

Answered: Exercise 16.18 LO 16-2, 16-3 The make…

Survey of Accounting (Accounting I)

8th Edition

ISBN:9781305961883

Author:Carl Warren

Publisher:Carl Warren

Chapter11: Cost-volume-profit Analysis

Section: Chapter Questions

Problem 11.4C: Variable costs and activity bases in decision making The owner of Dawg Prints, a printing company,...

See similar textbooks

Similar questions

Question 6 Amundsen Company makes 60,000 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 Direct Labor Variable Manufacturing Overhead Fixed Manufacturing Overhead Variable Selling Fixed Selling Total $ 10.10 $17.40 $ 2.70 $15.00 $ 2.75 $ 3.25 $51.20 An outside supplier has offered to sell the company all of these parts it needs. If the company accepts this offer, the facilities now being used to make the part would be idle and fixed manufacturing overhead would be reduced by 80% of current cost. The variable selling costs would be reduced to 40% of current cost. Required: What is the maximum amount the company should be willing to pay an outside supplier per unit for the part?
QUESTION 4 An organisation manufactures a single product. The following information with regard to the raw material needed in the production process is supplied to you: Normal delivery time: 2.5 weeksMaximum delivery time: 3.5 weeksNormal usage: 52 000 units per yearPurchase price per unit: R8.50Cost of placing an order: R18.00Interest rate: 2% per yearStoring cost per unit: R2.50 Required: Calculate the re-order point if the organisation has a policy to keep safety stock. Calculate the safety stock that should be kept by the organisation.
QUESTION 4 An organisation manufactures a single product. The following information with regard to the raw material needed in the production process is supplied to you: Normal delivery time: 2.5 weeksMaximum delivery time: 3.5 weeksNormal usage: 52 000 units per yearPurchase price per unit: R8.50Cost of placing an order: R18.00Interest rate: 2% per yearStoring cost per unit: R2.50 Required: Calculate the EOQ. Calculate the re-order point if the organisation does not keep safety stock.
Question 23 You are contemplating leaving your full-time employment to concentrate your ability on the marketing of a new low-energy portable heater. You have spoken to a group of manufacturers of similar product, and you have produced the following data based upon the production of 1200 heaters in the six months to December 31, 2021. R R Unit selling price 160 Less: Direct materials 50 Direct labour 30 Fixed Overheads: Admin 4.00 Rent 7.50 Rates…
Question 22 You are contemplating leaving your full-time employment to concentrate your ability on the marketing of a new low-energy portable heater. You have spoken to a group of manufacturers of similar product, and you have produced the following data based upon the production of 1200 heaters in the six months to December 31, 2021. R R Unit selling price 160 Less: Direct materials 50 Direct labour 30 Fixed Overheads: Admin 4.00 Rent 7.50 Rates…
QUESTION 10 Randall has received a special order for 4300 units of its product at a special price of $20. The product normally sells for $34 and has the following manufacturing costs: AZ Direct materials Direct labor Variable manufacturing overhead Fixed manufacturing overhead Per unit 2 3 3 2 Assume that Randall has sufficient capacity to fill the order. If Randall accepts the order, what effect will the order have on the company's short-term profit? *** If a decrease, place a sign before your answer. For example, a decrease of $1,000 would be answered -1,000.
Question 21 Fox Company has just received an unexpected order from a customer for 1,000 units of a new product. The product will have total variable costs of $15.00 per unit. Fox Company will have to rent a machine for $10,000, pay overtime amounting to $5,000 to a supervisor to handle this order, and fixed packaging and shipping costs of $2,000 for this order. The minimum (floor) price per unit that Fox Company should charge for this order is: Select one: a. $15 b. $30 c. $32 d. $25
Question 17 You are contemplating leaving your full-time employment to concentrate your ability on the marketing of a new low-energy portable heater. You have spoken to a group of manufacturers of similar product, and you have produced the following data based upon the production of 1200 heaters in the six months to December 31, 2021. R R Unit selling price 160 Less: Direct materials 50 Direct labour 30 Fixed Overheads: Admin 4.00 Rent 7.50 Rates…
QUESTION 28 Applesoft produces tablets, laptops and televisions. Applesoft typically sells 1,000 tablets a year. The tablet information is as follows: Selling price per unit Direct material cost per unit Direct labor cost per unit Total allocated overhead (1/4 avoidable if eliminate tablets) $60 $30 $15 $50,000 One fourth of the allocated overhead would be avoidable if the tablets were eliminated. How much would Operating Income change by if Applesoft were to eliminate the tablets? Be sure to include "-" in front of your amount if net income will decrease.
Question 11 You are contemplating leaving your full-time employment to concentrate your ability on the marketing of a new low-energy portable heater. You have spoken to a group of manufacturers of similar product, and you have produced the following data based upon the production of 1200 heaters in the six months to December 31, 2021. R R Unit selling price 160 Less: Direct materials 50 Direct labour 30 Fixed Overheads: Admin 4.00 Rent 7.50 Rates…
Question 10.4 Big Machines Corp. has two divisions. Division Y manufactures components that can be sold in the external market place or transferred to Division Z for further processing. The following data relate to Division Y's component product. Variable manufacturing costs/unit $925 Fixed costs/unit at capacity $275 Selling price/unit $1,800 The capacity of the plant is 2,500 units per year. Division Z has offered to purchase 350 units from Division Y at a price of $1,600/unit, which is the market price of the component. The manager of Division Y has refused this offer stating that it would only return a rate of 25.00%, when the divisional target return on sales is 28.00%. The Division Y manager also states that additional fixed costs of $195,000 would be required to produce the 350 units. The corporate required rate of return is 18% of assets and the existing asset base in Division Y is $2,500,000. Required: How many units must Division Y sell in order…
Homwork Question 6 MSI is considering outsourcing the production of the handheld control module used with some of its products. The company has received a bid from Monte Legend Co. (MLC) to produce 10,000 units of the module per year for $16 each. The following information pertains to MSI’s production of the control modules: Direct materials $9Direct labor $4Variable manufacturing overhead $2Fixed manufacturing overhead $3Total cost per unit $18 MSI has determined that it could eliminate all variable costs if the control modules were produced externally, but none of the fixed overhead is avoidable. At this time, MSI has no specific use in mind for the space that is currently dedicated to the control module production. 1. Compute the difference in cost between making and buying the control module.

SEE MORE QUESTIONS

Recommended textbooks for you

Survey of Accounting (Accounting I)

Accounting

ISBN:

9781305961883

Author:

Carl Warren

Publisher:

Cengage Learning

Managerial Accounting: The Cornerstone of Busines…

Accounting

ISBN:

9781337115773

Author:

Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger

Publisher:

Cengage Learning

Survey of Accounting (Accounting I)

Accounting

ISBN:

9781305961883

Author:

Carl Warren

Publisher:

Cengage Learning

Managerial Accounting: The Cornerstone of Busines…

Accounting

ISBN:

9781337115773

Author:

Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger

Publisher:

Cengage Learning

SEE MORE TEXTBOOKS