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…

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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Exercise 21.12 (Static) Pricing a Special Order (LO21-1, LO21-2, LO21-3) Mazeppa Corporation sells relays at a selling price of $28 per unit. The company's cost per unit, based on full capacity of 160,000 units, is as follows: Direct materials $ 6 Direct labor 4 Overhead (2/3 of which is variable) 9 Mazeppa has been approached by a distributor in Montana offering to buy a special order consisting of 30,000 relays. Mazeppa has the capacity to fill the order. However, it will incur an additional shipping cost of $2 for each relay it sells to the distributor. a-1. Assume that Mazeppa is currently operating at a level of 100,000 units. Show the calculation for the unit price to charge the distributor which will generate an increase in operating income of $2 per unit? a-2. What is your interpretation of the changes to the contribution margin per unit and the operating income on account of the unit price charged to the distributor? b-1. Assume that Mazeppa is currently operating at full…
Question One A company has developed a new product that has a short life cycle. Information about the product is as follows: Selling price and product life cycle The product will have a life cycle of 4,000 units. It is estimated that the first 3,500 units will be sold for $215 each. The product will then enter the “decline” stage of its life cycle when the selling price will be reduced. Production and costs The product will be produced in batches of 100 units. Labour will be paid at $24 per hour. Other variable costs will be $6,000 per batch. Fixed costs will total $130,000. These costs will apply throughout the product’s life. Learning curve The first batch will take 500 labour hours to produce. There will be a 90% learning curve that will continue until 32 batches have been produced. Every batch produced above this level of output will take the same amount of labour time as the 32nd batch. Note: The learning index for a 90% learning curve = -0.152 Required: (a) Calculate the time…
QS 22-17B Determining transfer prices with excess capacity LO C2 The Windshield division of Fast Car Co. makes windshields for use in Fast Car’s Assembly division. The Windshield division incurs variable costs of $200 per windshield and has capacity to make 500,000 windshields per year. The market price is $450 per windshield. The Windshield division incurs total fixed costs of $3,000,000 per year.If the Windshield division has excess capacity, what is the range of possible transfer prices that could be used on transfers between the Windshield and Assembly divisions?
Question 9.3 Golden Wind Office Furniture Company makes all types of office desks. The Home Office Desk Division is currently producing 10,000 desks per year with a capacity of 15,000. The variable costs assigned to each desk are $300 and annual fixed costs of the division are $900,000. The home office desks sell for $400. The Executive Division wants to buy 5,000 desks at $280 for its custom office design business. The Home Office Desk manager refuses the order because the price is below variable cost. The Executive manager argues that the order should be accepted because it will lower the fixed cost per desk from $90 to $60 and will take the division to its capacity, thereby causing operations to be at their most efficient level. Required: Should the order from Executive Division be accepted by Home Office Desk? Explain why or why not? From the perspective of the Home Office Desk Division and the company, should the order be accepted if the Executive Division plans on selling the…
Question 7 of 50 Sandhill Verde manufactures unpainted furniture for the do-it-yourself (DIY) market. It currently sells a table for $75. Production costs per unit are $36 variable and $13 fixed. Sandhill Verde is considering staining and sealing the table to sell it for $106. Unit variable costs to finish each table are expected to be an additional $19 per table, and fixed costs are expected to be an additional $4 per table. Prepare an analysis showing whether Sandhill Verde should sell stained or finished tables. (Enter negative amounts using either a negative sign preceding the number eg.-45 or parentheses e.g. (45)) Sales price per unit $ Cost per unit Variable -Fixed Total Net income per unit The tables should be $ $ Sell $ $ ||| Process Further Net Income Increase (Decrease)
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Question 16 Direct Labor Order Allocation Rate Machine Time Allocation Rate Request (Easy-Medium) Use the information below to answer the questions that follow. $ $ $ 38.00 per hour 46.55 $ of OH / order 2.83 $ of OH / machine hour Place the answer to each part of the question in the box provided. Under job costing, how much overhead will be applied to a unit that takes 0.5 hours to produce and is part of an order for 100 units? Under job costing, how much overhead will be applied to a unit that takes 2 hours to produce and is part of an order for 10 units? What is the total cost of the first product if materials are $2.50 and a person must be present to run the machines? What is the total cost of the second product if materials are $1 and a person must be present to run the machines for half the total time?
Exercise 23-3 Sell or process P2 lagerial Decisions Cobe Co. has manufactured 200 partially finished cabinets at a cost of $50,000. These can be sold as is for $60,000. Instead, the cabinets can be stained and fitted with hardware to make finished cabinets. Further processing costs would be $12,000, and the finished cabinets could be sold for $80,000. (a) Prepare a sell as is or process further analysis of income effects. (b) Should the cabinets be sold as is or processed further and then sold?
Exercise 13-9A (Static) Using the contribution margin approach for a special order decision LO 13-2 Hensely Company, which produces and sells a small digital clock, bases its pricing strategy on a 25 percent markup on total cost. Based on annual production costs for 25,000 units of product, computations for the sales price per clock follow. Unit-level costs Fixed costs Total cost (a) Markup (a x 0.25) Total sales (b) Sales price per unit (b÷ 25,000) Required $240,000 60,000 300,000 75,000 $375,000 $15 a. Hensely has excess capacity and receives a special order for 8,000 clocks for $12 each. Calculate the contribution margin per unit. Based on this, should Hensely accept the special order? b. Prepare a contribution margin income statement for the special order. Complete this question by entering your answers in the tabs below. Required A Required B Hensely has excess capacity and receives a special order for 8,000 clocks for $12 each unit. Based on this, should Hensely accept the…

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