One component of communication equipment produced by Briggs Audio Systems is currently being purchased for P225. Management is studying the possibility of manufacturing that component. Annual usage of the part is 5,000 units. Fixed costs (all of which remains unchanged whether the part is made or purchased) are at P140,000 or P28 per unit. If to be produced, Variable costs are P95 per unit for materials; P55 per unit for labor; and P60 per unit for variable manufacturing overhead. Required: Which option would be advantageous and by how much? 1. Make is advantageous by P75,000 2. Buy is advantageous by P75,000 3. Make is advantageous by P65,000
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- Jonfran Company manufactures three different models of paper shredders including the waste container, which serves as the base. While the shredder heads are different for all three models, the waste container is the same. The number of waste containers that Jonfran will need during the following years is estimated as follows: The equipment used to manufacture the waste container must be replaced because it is broken and cannot be repaired. The new equipment would have a purchase price of 945,000 with terms of 2/10, n/30; the companys policy is to take all purchase discounts. The freight on the equipment would be 11,000, and installation costs would total 22,900. The equipment would be purchased in December 20x4 and placed into service on January 1, 20x5. It would have a five-year economic life and would be treated as three-year property under MACRS. This equipment is expected to have a salvage value of 12,000 at the end of its economic life in 20x9. The new equipment would be more efficient than the old equipment, resulting in a 25 percent reduction in both direct materials and variable overhead. The savings in direct materials would result in an additional one-time decrease in working capital requirements of 2,500, resulting from a reduction in direct material inventories. This working capital reduction would be recognized at the time of equipment acquisition. The old equipment is fully depreciated and is not included in the fixed overhead. The old equipment from the plant can be sold for a salvage amount of 1,500. Rather than replace the equipment, one of Jonfrans production managers has suggested that the waste containers be purchased. One supplier has quoted a price of 27 per container. This price is 8 less than Jonfrans current manufacturing cost, which is as follows: Jonfran uses a plantwide fixed overhead rate in its operations. If the waste containers are purchased outside, the salary and benefits of one supervisor, included in fixed overhead at 45,000, would be eliminated. There would be no other changes in the other cash and noncash items included in fixed overhead except depreciation on the new equipment. Jonfran is subject to a 40 percent tax rate. Management assumes that all cash flows occur at the end of the year and uses a 12 percent after-tax discount rate. Required: 1. Prepare a schedule of cash flows for the make alternative. Calculate the NPV of the make alternative. 2. Prepare a schedule of cash flows for the buy alternative. Calculate the NPV of the buy alternative. 3. Which should Jonfran domake or buy the containers? What qualitative factors should be considered? (CMA adapted)One component of communication equipment produced by Briggs Audio Systems is currently being purchased for P225. Management is studying the possibility of manufacturing that component. Annual usage of the part is 5,000 units. Fixed costs (all of which remains unchanged whether the part is made or purchased) are at P140,000 or P28 per unit. If to be produced, Variable costs are P95 per unit for materials; P55 per unit for labor; and P60 per unit for variable manufacturing overhead. Required: Which option would be advantageous and by how much? Make is advantageous by P75,000 Buy is advantageous by P75,000 Make is advantageous by P65,000 Buy is advantageous by P65,000 Group of answer choices 1 2 3 4Part P40 is a part used in the production of dehumidifiers at Pollock Corporation. The following costs and data relate to the production of Part P40: Number of parts produced annually Fixed costs Variable costs Total cost to produce 25,000 $44,000 $68,000 $112,000 Pollock Corporation can purchase the part from an outside supplier for $4.55 per unit. If they purchase from the outside supplier, 50% of the fixed costs would be avoided. If the company buys the part, what is the most it can spend per unit so that operating income is equal to $97,000? (Round the final answer to the nearest cent.) A. $3.00 B. $3.88 OC. $2.12 D. $1.55
- Regis Company makes the plugs it uses in one of its products at a cost of P36 per unit. This cost includes P8 of fixed overhead. Regis needs 30,000 of these plugs annually, and Orlan Company has offered to sell them to Regis at P33 per unit. If Regis decides to purchase the plugs, P60,000 of the annual fixed overhead will be eliminated, and the company may be able to rent the facility previously used for manufacturing the plugs. If the plugs are purchased and the facility rented, Regis Company wishes to realize P100,000 in savings annually. To achieve this goal, the minimum annual rent on the facility must be: O P10,000 O P40,000 O P70,000 O P190,000Regis Company manufactures plugs at a cost of $36 per unit, which includes $8 of fixed overhead. Regis needs 30,000 of these plugs annually (as part of a larger product it produces). Orlan Company has offered to sell these units to Regis at $33 per unit. If Regis decides to purchase the plugs, $60,000 of the annual fixed overhead cost will be eliminated, and the company may be able to rent the facility previously used for manufacturing the plugs. If Regis Company purchases the plugs but does not rent the unused facility, the company would:Gelb Company currently manufactures 47,500 units per year of a key component for its manufacturing process. Variable costs are $4.05 per unit, fixed costs related to making this component are $85,000 per year, and allocated fixed costs are $70,500 per year. The allocated fixed costs are unavoidable whether the company makes or buys this component. The company is considering buying this component from a supplier for $3.70 per unit. Calculate the total incremental cost of making 47,500 units and buying 47,500 units. Should it continue to manufacture the component, or should it buy this component from the outside supplier? Complete this question by entering your answers in the tabs below. Outside Supplier Calculate the total incremental cost of making 47,500 units. (Round "variable cost per unit" answers to 2 decimal places.) Incremental Costs to Make Relevant Amount per Unit Costs to Make Costs to Buy Variable cost per unit Fixed manufacturing costs Total incremental cost to make…
- Regis Company manufactures plugs at a cost of $40 per unit, which includes $5 of fixed overhead. Regis needs 30,000 of these plugs annually (as part of a larger product it produces). Orlan Company has offered to sell these units to Regis at $39 per unit. If Regis decides to purchase the plugs, $60,000 of the annual fixed overhead cost will be eliminated, and the company may be able to rent the facility previously used for manufacturing the plugs. If the plugs are purchased and the facility rented, Regis Company wishes to realize $100,000 in net savings annually. To achieve this goal, the minimum annual rent on the facility must be: Question 16 options: a) $120,000. b) $100,000. c) $70,000. d) $310,000. e) $220,000.MM currently carries out process B the output from which can be sold for $20 per unit and has variable costs of $7.50 per unit. Process B has directly attributable fixed operating costs of $ 40000 per annum. MM also carries out process C by using equipment that has running costs of $ 25000 per annum. The equipment could be sold now for $50000 (but this would incur dismantling costs of $7500) or in one year’s time for $45000 with dismantling costs of $8750. Process B could be adapted so that it incorporated process C. The existing process B machinery would have to be removed, either now at a dismantling cost of $12500 and with the sale of the machinery for $100000 or in one year’s time for $75000 with dismantling costs of $13750. Alternative process B machinery would have to be leased. This would cost $10000 per annum and have annual fixed costs of $30000. The existing process B machinery originally costs $250000 which bought five years ago. It is being depreciated at 10% per annum.…Gelb Company currently manufactures 40,000 units per year of a key component for its manufacturing process. Variable costs are $1.95 per unit, fixed costs related to making this component are $65,000 per year, and allocated fixed costs are $58,500 per year. The allocated fixed costs are unavoidable whether the company makes or buys this component. The company is considering buying this component from a supplier for $3.50 per unit. Calculate the total incremental cost of making 40,000 units and buying 40,000 units. Should it continue to manufacture the component, or should it buy this component from the outside supplier?
- MM currently carries out process B the output from which can be sold for $20 per unit and has variable costs of $7.50 per unit. Process B has directly attributable fixed operating costs of $ 40000 per annum. MM also carries out process C by using equipment that has running costs of $ 25000 per annum. The equipment could be sold now for $50000 (but this would incur dismantling costs of $7500) or in one year’s time for $45000 with dismantling costs of $8750.Process B could be adapted so that it incorporated process C.The existing process B machinery would have to be removed, either now at a dismantling cost of $12500 and with the sale of the machinery for $100000 or in one year’s time for $75000 with dismantling costs of $13750.Alternative process B machinery would have to be leased. This would cost $10000 per annum and have annual fixed costs of $30000.The existing process B machinery originally costs $250000 which bought five years ago. It is being depreciated at 10% per…Gelb Company currently manufactures 40,000 units per year of a key component for its manufacturing process. Variable costs are $1.95 per unit, fixed costs related to making this component are $65,000 per year, and allocated fixed costs are $58,500 per year. The allocated fixed costs are unavoidable whether the company makes or buys this component. The company is considering buying this component from a supplier for $3.50 per unit. Should it continue to manufacture the component, or should it buy this component from the outside supplier?Gelb Company currently manufactures 52,000 units per year of a key component for its manufacturing process. Variable costs are $7.35 per unit, fixed costs related to making this component are $67,000 per year, and allocated fixed costs are $82,500 per year. The allocated fixed costs are unavoidable whether the company makes or buys this component. The company is considering buying this component from a supplier for $3.90 per unit. Calculate the total incremental cost of making 52,000 units and buying 52,000 units. Should it continue to manufacture the component, or should it buy this component from the outside supplier? Complete this question by entering your answers in the tabs below. Outside Supplier Calculate the total incremental cost of making 52,000 units. (Round "variable cost per unit" answers to 2 decimal places.) Incremental Costs to Make Relevant Amount per Unit Costs to Make Costs to Buy Variable cost per unit Fixed manufacturing costs Total incremental cost to make…