U-RIDE, Incorporated currently produces the electric engines that are used in golf carts made and sold by the Company. Electco has offered to sell the electric engines to U-RIDE at a price of $291 each.Current production information follows:Unit-level material and labor$240Facility-level depreciation of manufacturing equipmentProduct-level engine production supervisor's salary$6,300 /month$3,300 /month$21,500Annual facility-level utilitiesU-RIDE is currently operating profitably producing and selling 3,300 engines a year using 80% of its manufacturing capacity. Which of the following is true?Multiple ChoiceOOU-RIDE should make the engines for cost savings of $51 per unit.Buying the units would increase U-RIDE's cost by $39 per unit.U-RIDE has avoidable costs of greater than $291 per unit and should therefore buy the engines.Buying the units would increase profitability by $90 per unit.

Facility-level depreciation and Annual facility-level utilities would not be considered for…

Answered: J-RIDE is currently operating…

J-RIDE is currently operating profitably producing and selling 3,300 engines a year using 80% of its manufacturing capacity. Which of the following is true?

Intermediate Accounting: Reporting And Analysis

3rd Edition

ISBN:9781337788281

Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Publisher:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Chapter10: Property, Plant And Equipment: Acquisition And Subsequent Investments

Section: Chapter Questions

Problem 7P: Self-Construction Olson Machine Company manufactures small and large milling machines. Selling...

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Self-Construction Olson Machine Company manufactures small and large milling machines. Selling prices of these machines range from 35,000 to 200,000. During the 5-month period from August 1, 2019, through December 31, 2019, Olson manufactured a milling machine for its own use. This machine was built as part of the regular production activities. The project required a large amount of time front planning and supervisory personnel, as well as that of some of the companys officers, because it was a more sophisticated type of machine than the regular production models. Throughout the 5-month period, Olson charged all costs directly associated with the construction of the machine to a special account entitled Asset Construction Account. An analysis of the charges to this account as of December 31, 2019, follows: Olson allocates factory overhead to normal production as a percent of direct labor dollars as follows: Olson uses a flat rate of 40% of direct labor dollars to allocate general and administrative overhead. During the machine testing period, a cutter head malfunctioned and did extensive damage to the machine table and one cutter housing. This damage was not anticipated and was the result of an error in the assembly operation. Although no additional raw materials were needed to make the machine operational after the accident, the following labor for rework was required: Olson has included all these labor charges in the asset construction account. In addition, it included in the account the repairs and maintenance charges of 1,340 that it incurred as a result of the malfunction. Required: 1. Compute, consistent with GAAP and common practice, the amount that Olson should capitalize for the milling machine as of December 31, 2019, when it declares the machine operational. 2. Next Level Identify the costs you included in Requirement 1 for which there are acceptable alternative procedures. Describe the alternative procedure(s) in each case.
U-RIDE, Inc. currently produces the electric engines that are used in golf carts made and sold by the Company. Electco has offered to sell the electric engines to U-RIDE at a price of $207 each. Current production information follows: Unit-level material and labor $ 180 Facility-level depreciation of manufacturing equip. $ 5,100 /month Product-level engine production supervisor's salary $ 2,100 /month Annual facility-level utilities $ 15,500 U-RIDE is currently operating profitably producing and selling 2,100 engines a year using 80% of its manufacturing capacity. Which of the following is true? Multiple Choice U-RIDE should make the engines for cost savings of $27 per unit. Buying the units would increase U-RIDE's cost by $15 per unit. U-RIDE has avoidable costs of greater than $207 per unit and should therefore buy the engines. Buying the units would increase profitability by $42 per unit.
Gibson Company makes and sells lawn mowers for which it currently makes the engines, It has an opportunity to purchase the engines from a reliable manufacturer. The annual costs of making the engines are shown here. Cost of materials (14,700 Units x $17) Labor (14,700 Units x $17) Depreciation on manufacturing equipment Salary of supervisor of engine production Rental cost of equipment used to make engines Allocated portion of corporate-level facility-sustaining costs $ 249,900 249, 900 32,000 73,000 16,000 89,000 $ 709,800 Total cost to make 14,700 engines *The equipment has a book value of $97,000 but its market value is zero. JFZ Note: Is the Book Value of an asset (original cost - depreciation taken to date) ever relevant? No. Book vaiue is the result of a decision made in the past (I.e. Sunk). Required a. Determine the maximum price per unit that Gibson would be willing to pay for the engines (.e. where the cost would be the same and management would be "indifferent" between…
Perez Company makes and sells lawn mowers for which it currently makes the engines. It has an opportunity to purchase the engines from a reliable manufacturer. The annual costs of making the engines are shown here. Cost of materials (13,300 units × $13) $ 172,900 Labor (13,300 units × $14) 186,200 Depreciation on manufacturing equipment* 29,000 Salary of supervisor of engine production 69,000 Rental cost of equipment used to make engines 15,000 Allocated portion of corporate-level facility-sustaining costs 79,000 Total cost to make 13,300 engines $ 551,100 *The equipment has a book value of $109,000 but its market value is zero. Required Determine the maximum price per unit that Perez would be willing to pay for the engines. Determine the maximum price per unit that Perez would be willing to pay for the engines, if production increased to 19,000 units.
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Munoz Company makes and sells lawn mowers for which it currently makes the engines. It has an opportunity to purchase the engines from a reliable manufacturer. The annual costs of making the engines are shown here. Cost of materials (13,100 Units × $19) $ 248,900 Labor (13,100 Units × $12) 157,200 Depreciation on manufacturing equipment* 25,000 Salary of supervisor of engine production 69,000 Rental cost of equipment used to make engines 27,000 Allocated portion of corporate-level facility-sustaining costs 82,000 Total cost to make 13,100 engines $ 609,100 *The equipment has a book value of $108,000 but its market value is zero.Required Determine the maximum price per unit that Munoz would be willing to pay for the engines. Determine the maximum price per unit that Munoz would be willing to pay for the engines, if production increased to 18,650 units. (For all requirements, Round your answers to 2 decimal places.)
Ficher auto manufactures 15,350 components per year. The manufacturing cost of the components was determined to be as follows: Direct materials $ 152,000 Direct labor 250,000 Variable manufacturing overhead 91,000 Fixed manufacturing overhead 130,000 Total 623,000 Assume that the fixed manufacturing overhead reflects the cost of Ficher manufacturing facility. This facility cannot be used for any other purpose. An outside supplier has offered to sell the component to Ficher for $34. If Ficher purchases the component from the outside supplier, the effect on operating profits would be? %24
Zachary Company makes and sells lawn mowers for which it currently makes the engines. It has an opportunity to purchase the engines from a reliable manufacturer. The annual costs of making the engines are shown here. Cost of materials (14,700 units x $19) Labor (14,700 units × $25) Depreciation on manufacturing equipment* Salary of supervisor of engine production Rental cost of equipment used to make engines Allocated portion of corporate-level facility-sustaining costs Total cost to make 14,700 engines *The equipment has a book value of $101,000 but its market value is zero. Required $ 279,300 367,500 37,000 84,000 16,000 79,000 $ 862,800 a. Determine the maximum price per unit that Zachary would be willing to pay for the engines. b. Determine the maximum price per unit that Zachary would be willing to pay for the engines, if production increased to 18,350 units. Note: For all requirements, round intermediate and final answers to 2 decimal places. a. Maximum price per unit b. Maximum…
Genent's Engine Company manufactures part TE456 used in several of its engine models. Monthly production costs for 1,000 units are as follows: Direct materials $46,000 Direct labor 11,500 Variable overhead costs 34,500 Fixed overhead costs 23,000 Total costs $115,000 It is estimated that 8% of the fixed overhead costs assigned to TE456 will no longer be incurred if the company purchases TE456 from the outside supplier. Genent's Engine Company has the option of purchasing the part from an outside supplier at $97.75 per unit. The maximum price per unit (TE456 part) that Genent's Engine Company should be willing to pay the…