Exercise 6-13A (Algo) Outsourcing decision affected by opportunity costs LO 6-3 Stuart Electronics currently produces the shipping containers it uses to deliver the electronics products it sells. The monthly cost of producing 9,000 containers follows. Unit-level materials Unit-level labor Unit-level overhead Product-level costs* Allocated facility-level costs $ 7,000 6,600 3,800 7,500 28,200 *One-third of these costs can be avoided by purchasing the containers. Russo Container Company has offered to sell comparable containers to Stuart for $2.80 each. Required a. Calculate the total relevant cost. Should Stuart continue to make the containers? b. Stuart could lease the space it currently uses in the manufacturing process. If leasing would produce $11,000 per month, calculate the total avoidable costs. Should Stuart continue to make the containers? a. Total relevant cost a. Should Stuart continue to make the containers? b. Total avoidable cost b. Should Stuart continue to make the containers?

Exercise 6-13A (Algo) Outsourcing decision affected by opportunity costs LO 6-3 Stuart Electronics currently produces the shipping containers it uses to deliver the electronics products it sells. The monthly cost of producing 9,000 containers follows. Unit-level materials Unit-level labor Unit-level overhead Product-level costs* Allocated facility-level costs $ 7,000 6,600 3,800 7,500 28,200 *One-third of these costs can be avoided by purchasing the containers. Russo Container Company has offered to sell comparable containers to Stuart for $2.80 each. Required a. Calculate the total relevant cost. Should Stuart continue to make the containers? b. Stuart could lease the space it currently uses in the manufacturing process. If leasing would produce $11,000 per month, calculate the total avoidable costs. Should Stuart continue to make the containers? a. Total relevant cost a. Should Stuart continue to make the containers? b. Total avoidable cost b. Should Stuart continue to make the containers?

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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sions Question 1 rences View Policies porations Current Attempt in Progress PLUS Support Bonita's Manufacturing Company can make 100 units of a Central necessary component part with the following costs: e 365 $119000 Direct Materials 24000 Direct Labor ges 53000 Variable Overhead za 30000 Fixed Overhead If Bonita's Manufacturing Company can purchase the component externally for $195000 and only $6000 of the fixed costs can be avoided, what is the correct make-or-buy decision? O Make and save $7000 O Make and save $22000 Buy and save $7000 OBuy and save $22000 ip
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Exercise 7-4 (Algo) Second-Stage Allocation [LO7-4] Klumper Corporation is a diversified manufacturer of industrial goods. The company's activity-based costing system contains the following six activity cost pools and activity rates: Activity Cost Pool Supporting direct labor Machine processing Machine setups Production orders. Shipments Product sustaining Activity data have been supplied for the following two products: Number of units produced per year Direct labor-hours Machine-hours Machine setups Production orders Shipments Product sustaining Activity Rate $10 per direct labor-hour $3 per machine-hour $50 per setup $ 170 per order $115 per shipment $850 per product Activity Cost Pool Supporting direct labor Machine processing Machine setups Production orders Shipments Product sustaining Total overhead cost K425 Total Expected Activity K425 M67 2,000 200 1,075 2,600 19 19 38 Required: How much total overhead cost would be assigned to K425 and M67 using the activity-based costing…
Exercise 7-4 (Algo) Second-Stage Allocation [LO7-4] Klumper Corporation is a diversified manufacturer of industrial goods. The company's activity-based costing system contains the following six activity cost pools and activity rates: Activity Cost Pool Supporting direct labor Machine processing Machine setups Activity Rates $ 11 per direct labor -hour 4 per machine-hour 50 per setup $ 150 per order $ 125 per shipment $ 850 per product Production orders Shipments Product sustaining Activity data have been supplied for the following two products: Total Expected Activity K425 Number of units produced per year Direct labor-hours Machine-hours Machine setups 200 2,000 975 40 3,000 30 13 2 Production orders Shipments Product sustaining 13 2 26 2 2 Required: How much total overhead cost would be assigned to K425 and M67 using the activity-based costing system? Activity Cost Pool K425 M67 Supporting direct labor Machine processing Machine setups Production orders Shipments Product sustaining…