Mohave Corporation is considering outsourcing production of the umbrella tote bag included with some of its products. The company has received a bid from a supplier in Vietnam to produce 8,900 units per year for $7.50 each. Mohave the following information about the cost of producing tote bags: Direct materials Direct labor Variable manufacturing overhead Fixed manufacturing overhead Total cost per unit $ 4.00 1.00 1.00 2.00 $ 8.00 Mohave determined all variable costs could be eliminated by outsourcing the tote bags, while 70 percent of the fixed overhead cost is unavoidable. At this time, Mohave has no specific use in mind for the space currently dedicated to producing the tote bags. Required: 1. Compute the difference in cost between making and buying the umbrella tote bag. 2. Based strictly on the incremental analysis, should Mohave buy the tote bags or continue to make them? 3-a. Suppose the space Mohave currently uses to make the bags could be utilized by a new product line that would generate $12,000 in annual profits. Recompute the difference in cost between making and buying the umbrella tote bag. 3-b. Does this change your recommendation to Mohave?

Stripe Company has been purchasing a component, Part Q, for P19.20 per unit. Stripe is currently operating at 70% of capacity, and no significant increase in production is anticipated in the near future. The cost of manufacturing a unit of Part Q is estimated as follows: Direct materials P11.50 Direct labor 4.50 Variable factory overhead 1.12 Fixed factory overhead     3.15 Total P20.27   Should the company make or buy the component? Prepare a differential analysis report dated March 12 of the current year to support your answer.

Voltaic Electronics uses a standard part in the manufacture of different types of radios. The total cost of producing 36,000 parts is $ 100,000, which includes fixed costs of $ 40,000 and variable costs of $ 60,000. The company can buy the part from an outside supplier for $2 per unit and avoid 20% of the fixed costs. Assume that the company can use the freed manufacturing space to make another product that can earn a profit of $ 15,000. If Voltaic outsources, what will be the effect on operating income?A. decrease of $11,000B. increase of $ 11,000C. increase of $ 15,000D . decrease of $ 8,000

Vista Company manufactures electronic equipment. It currently purchases the special switches used in each of its products from an outside supplier. The supplier charges Vista $5.20 per switch. Vista 's CEO is considering purchasing either machine A or machine B so the company can manufacture its own switches. The projected data are as follows: Machine A Machine B Annual fixed costs $ 582, 450 $ 792, 100 Variable cost per switch 1.67 0.75 Required: 1. For each machine, what is the minimum number of switches that Vista must make annually for total costs to equal outside purchase cost? 2. What volume level would produce the same total costs regardless of the machine purchased? 3. What is the most profitable alternative for producing 230,000 switches per year and what is the total cost of that alternative?

Leach Finishing makes various metal fittings for the construction industry. Three of the fittings, models X-12, X-24, and X-30, require grinding on a patented machine of which Leach has only one. The cost of production information for the three products follow: X-12 $35 $ 20 18.0 Price per fitting Variable cost per fitting Units per hour of grinding The testing machine used for both models has a capacity of 3,230 hours annually. Fixed manufacturing costs are $496,000 annually. Required A Required B X-24 $ 51 $ 27 12.5 Required: a. Suppose that Leach Finishing can sell at most 59,200 units of any one fitting. How many units of each fitting model should Leach Finishing produce annually? b. Suppose that Leach Finishing can sell at most 18,000 units of any one fitting. How many units of each fitting should Leach Finishing produce annually? X-30 $ 70 $ 44 10.0 Complete this question by entering your answers in the tabs below. X-12 X-24 X-30 units units units Suppose that Leach Finishing can…

Value Electronics uses a standard part in the manufacture of different types of radios. The total cost of producing 32,000 parts is $90,000​, which includes fixed costs of $30,000 and variable costs of $60,000. The company can buy this part from an external supplier for $5 per unit and avoid 10​% of the fixed costs. If Value Electronics decides to outsource the production of the​ part, how will it impact its operating​ income? A. Operating income increases by $97,000.   B. Operating income decreases by $100,000.   C. Operating income decreases by $97,000.   D. Operating income increases by $100,000.

Jade Ltd. manufactures a product, which regularly sells for $67.75. This product has the following costs per unit at the expected production of 47,500 units: Cost Amount Direct labour $20.00 Direct materials 10.50 Manufacturing overhead (36% is variable) 24.00 The company has the capacity to produce 52,250 units. A wholesaler has offered to pay $77 for 12,000 units. If Jade Ltd. accepts this special order, operating income would increase (decrease) by how much?

Smooth Company manufactures decorative mugs and has been approached by a new customer with an offer to purchase 15,000 units at a price of P70/unit. The new customer is geographically separated from Smooth Company's other customers and existing sales will not be affected. Smooth Company normally produce and sell only 65,000 units in the year. The normal sales price is P120 per unit. Production cost information is as follows: Direct materials P30.00 P22.50 P11.50 Direct labor Variable overhead Fixed overhead P18.00 If Smooth Company accepted the order, they would have to purchase a special logo labelling machine that will cost P120,000. The machine will be used to label the 15,000 units and will be scrapped afterwards. In addition, each logo requires additional direct materials of P2.00. Which alternative is best for Smooth Company? By how much profit will increase or decrease if the order is accepted?

Tolkien Transporthas a small facility adjacent to its Leeds depot which it uses to manufacture tarpaulins for its lorries. The facility currently produces3000 tarpaulins a year. The company’s Finance Manager has estimated the cost per tarpaulin at this level of output to be:             Cost per unit Direct Materials £50 Direct Labour (cutting, trimming and sewing) £45 Variable manufacturing overhead £37 Fixed manufacturing overhead £43 An outside supplier has offered to supply all the tarpaulins required by Tolkien for £145 each. If Tolkien decided not to make the tarpaulins, there would be no other use for the production facilities and none of the fixed manufacturing overhead cost could be avoided. Required: Calculate how much higher or lower Tolkien’s net operating income would be if it purchased the tarpaulins from the outside supplier, showing all calculations. Would you advise Tolkien to accept the offer? Clearly explain to Tolkien’s Finance…

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