Make-or-Buy Decision, Alternatives, Relevant Costs Each year, Giada Company produces 14,000 units of a component part used in tablet computers. An outside supplier has offered to supply the part for $1.16. The unit cost is: Direct materials $0.73 Direct labor 0.28 Variable overhead 0.07 Fixed overhead  2.00    Total unit cost $3.08 Required: 1. What are the alternatives for Giada Company?   2. Assume that none of the fixed cost is avoidable. List the relevant cost(s) of internal production.   List the relevant cost(s) of external purchase.   3. Which alternative is more cost effective and by how much?    by $fill in the blank 5 4. What if $21,960 of fixed overhead is rental of equipment used only in production of the component that can be avoided if the component is purchased? Which alternative is more cost effective and by how much?    by $fill in the blank 7

The Rosa model of Mohave Corporation is currently manufactured as a very plain umbrella with no decoration. The company is considering changing this product to a much more decorative model by adding a silk-screened design and embellishments. A summary of the expected costs and revenues for Mohave's two options follows: Estimated demand Estimated sales price Estimated manufacturing cost per unit Direct materials Direct labor Variable manufacturing overhead Fixed manufacturing overhead Unit manufacturing cost Additional development cost Rosa Umbrella 29,000 units $31.00 $ 21.50 4.50 3.50 6.00 $ 35.50 Decorated Umbrella 29,000 units $ 41.00 $ 23.50 7.00 5.50 6.00 $ 42.00 $ 12,000 Required: 1. Determine the increase or decrease in profit if Mohave sells the Rosa Umbrella with the additional decorations. 2. Should Mohave add decorations to the Rosa umbrella? 3-a.Suppose the higher price of the decorated umbrella is expected to reduce estimated demand for this product to 27,000 units.…

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Industrial Robots does not manufacture its own motors or computer chips. Its premium product differs from its standard product in having heavier-duty motors and more computer chips for greater flexibility. As a result, Industrial Robots manufactures a higher fraction of the standard product’s value itself, and it purchases a higher fraction of the premium product’s value. Use the following data to allocate $850,000 in overhead on the basis of labor cost and materials cos

Laser Cast Inc. manufactures color laser printers. Model J20 presently sells for $325 and has a product cost of $260, as follows: Line Item Description Amount Direct materials $190 Direct labor 50 Factory overhead 20 Total $260 It is estimated that the competitive selling price for color laser printers of this type will drop to $310 next year. Laser Cast has established a target cost to maintain its historical markup percentage on product cost. Engineers have provided the following cost-reduction ideas: 1. Purchase a plastic printer cover with snap-on assembly, rather than with screws. This will reduce the amount of direct labor by 9 minutes per unit.2. Add an inspection step that will add six minutes per unit of direct labor but reduce the materials cost by $7 per unit.3. Decrease the cycle time of the injection molding machine from four minutes to three minutes per part. Thirty percent of the direct labor and 45% of the factory overhead are related to running injection…

Make-or-Buy Decision Matchless Computer Company has been purchasing carrying cases for its portable computers at a purchase price of $58 per unit. The company, which is currently operating below full capacity, charges factory overhead to production at the rate of 38% of direct labor cost. The fully absorbed unit costs to produce comparable carrying cases are expected to be as follows: $27 Direct materials Direct labor Factory overhead (38% of direct labor) Total cost per unit If Matchless Computer Company manufactures the carrying cases, fixed factory overhead costs will not increase and variable factory overhead costs associated with the cases are expected to be 14% of the direct labor costs. a. Prepare a differential analysis dated February 24 to determine whether the company should make (Alternative 1) or buy (Alternative 2) the carrying case. If required, round your answers to two decimal places. If an amount is zero, enter "0". For those boxes in which you must enter subtracted or…

Parker Pottery produces a line of vases and a line of ceramic figurines. Each line uses the same equipment and labor; hence, there are no traceable fixed costs. Common fixed cost equals $38, 400. Parker's accountant has begun to assess the profitability of the two lines and has gathered the following data for last year: Vases Figurines Price $40 $70 Variable cost 30 42 Contribution margin $10 $28 Number of units 1,000 500 Required: If required, round your final answers to nearest whole value. 1. Compute the number of vases and the number of figurines that must be sold for the company to break even. Break - even vases fill in the blank 1 units Break - even figurines fill in the blank 2 units 2. Parker Pottery is considering upgrading its factory to improve the quality of its products. The upgrade will add $5, 280 per year to total fixed cost. If the upgrade is successful, the projected sales of vases will be 2,000, and figurine sales will increase to 1,000 units. What is the new break -…

Pina Colada Racers makes bicycles. It has always purchased its bicycle tires from the Ivanhoe Tires at $25 each but is currently considering making the tires in its own factory. The estimated costs per unit of making the tires are as follows: Direct materials Direct labor Variable manufacturing overhead Total relevant cost $8 $4 The company's fixed expenses would increase by $63,000 per year if managers decided to make the tire. (a1) Calculate total relevant cost to make or buy if the company needs 10,300 tires a year. Make $7 $ Buy

Dewey Manufacturing has been approached by a new customer with an offer to purchase 500 units of its hands-free automotive model SMAK at a price of $15,000 per unit. Existing sales would not be affected, and Dewey has sufficient capacity to produce the special order. Fixed overhead will not change if Dewey accepts the order or not. Unit cost data is:   Per Unit: Direct Materials $6,000  Direct Labor $2,500  Variable OVHD $3,500  Fixed OVHD $10,000    $22,000    Normal sales price is $27,000. Assume Dewey decides to accept the order. How much will their operating income change? Should they have accepted the order

The Rosa model of Mohave Corporation is currently manufactured as a very plain umbrella with no decoration. The company is considering changing this product to a much more decorative model by adding a silk-screened design and embellishments. A summary of the expected costs and revenues for Mohave’s two options follows:   Rosa Umbrella Decorated Umbrella Estimated demand 11,000 units 11,000 units Estimated sales price $ 9.00   $ 20.00   Estimated manufacturing cost per unit         Direct materials $ 3.50   $ 5.50   Direct labor 1.50   4.00   Variable manufacturing overhead 0.50   2.50   Fixed manufacturing overhead 2.00   2.00   Unit manufacturing cost $ 7.50   $ 14.00   Additional development cost     $ 11,000   Required: 1. Determine the increase or decrease in profit if Mohave sells the Rosa Umbrella with the additional decorations. 2. Should Mohave add decorations to the Rosa umbrella? 3-a.Suppose the higher price of the decorated umbrella is expected to…