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RDX Corporation produces washing machines and has always manufactured all the necessary parts. An external supplier has offered to sell a motor to the corporation for $35 each. To evaluate the offer the following costs relative to the current production of the motor has been extracted: Direct Materials Direct Labour Variable Manufacturing Overhead Fixed Manufacturing Overhead Per Unit $ 15 $ 12 $ 3 $ 20 15,000 Per Year $ 225,000 $ 180,000 $ 45,000 $ 300,000 Required: a. Assuming that the corporation has no alternative use for the facilities presently being used to manufacture the motor, should the corporation accept the offer to buy the part? b. Suppose that the corporation could use the spare facilities to produce another product which could generate a contribution of $150,000 per year, would the decision be different?

RDX Corporation produces washing machines and has always manufactured all the necessary parts. An external supplier has offered to sell a motor to the corporation for $35 each. To evaluate the offer the following costs relative to the current production of the motor has been extracted: Direct Materials Direct Labour Variable Manufacturing Overhead Fixed Manufacturing Overhead Per Unit $ 15 $ 12 $ 3 $ 20 15,000 Per Year $ 225,000 $ 180,000 $ 45,000 $ 300,000 Required: a. Assuming that the corporation has no alternative use for the facilities presently being used to manufacture the motor, should the corporation accept the offer to buy the part? b. Suppose that the corporation could use the spare facilities to produce another product which could generate a contribution of $150,000 per year, would the decision be different?

FINANCIAL ACCOUNTING
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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step by step please. parts a-b

Question 4 Part A RDX Corporation produces washing machines and has always manufactured all the necessary parts. An external supplier has offered to sell a motor to the corporation for $35 each. To evaluate the offer the following costs relative to the current production of the motor has been extracted: 15,000 Per Year Direct Materials Direct Labour Variable Manufacturing Overhead Fixed Manufacturing Overhead Per Unit $ 15 $ 12 $ 3 $ 20 $ 225,000 $ 180,000 $ 45,000 $ 300,000 Required: a. Assuming that the corporation has no alternative use for the facilities presently being used to manufacture the motor, should the corporation accept the offer to buy the part? b. Suppose that the corporation could use the spare facilities to produce another product which could generate a contribution of $150,000 per year, would the decision be different?
Transcribed Image Text:Question 4 Part A RDX Corporation produces washing machines and has always manufactured all the necessary parts. An external supplier has offered to sell a motor to the corporation for $35 each. To evaluate the offer the following costs relative to the current production of the motor has been extracted: 15,000 Per Year Direct Materials Direct Labour Variable Manufacturing Overhead Fixed Manufacturing Overhead Per Unit $ 15 $ 12 $ 3 $ 20 $ 225,000 $ 180,000 $ 45,000 $ 300,000 Required: a. Assuming that the corporation has no alternative use for the facilities presently being used to manufacture the motor, should the corporation accept the offer to buy the part? b. Suppose that the corporation could use the spare facilities to produce another product which could generate a contribution of $150,000 per year, would the decision be different?
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Forecasted cash receipts and expenditure for the period August to October are as follows: Cash Receipts Expenditure $ $ 60,000 58,000 July August September October 54000 68,000 90,000 30,000 44,000 Additional information provided: ✓ Expenditure for the period July to October includes monthly depreciation of $5,000. ✓ Payment for the cash related expenditure would be 40% in the month of purchase, the balance being paid the following month. The company intends to sell equipment valued at $25,000 in September. Insurance of $25,000 is payable in December. Opening cash balance as at August 1, $18,800. Required: Prepare a monthly Cash Budget for the period August to October 2021.
Transcribed Image Text:Forecasted cash receipts and expenditure for the period August to October are as follows: Cash Receipts Expenditure $ $ 60,000 58,000 July August September October 54000 68,000 90,000 30,000 44,000 Additional information provided: ✓ Expenditure for the period July to October includes monthly depreciation of $5,000. ✓ Payment for the cash related expenditure would be 40% in the month of purchase, the balance being paid the following month. The company intends to sell equipment valued at $25,000 in September. Insurance of $25,000 is payable in December. Opening cash balance as at August 1, $18,800. Required: Prepare a monthly Cash Budget for the period August to October 2021.
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