RelyaTech Corporation makes an extra large part to use in one its fabulous products. A total of 19,000 units of this extra large part are produced and used every year. The company's costs of producing the extra large part at this level of activity are below. Direct materials Direct labor Variable manufacturing overhead Supervisor's salary Depreciation of special equipment Allocated general overhead Per Unit $4.10 $8.70 $9.20 $4.60 $3.00 $8.20 (ID#32835) An outside supplier has offered to make the extra large part and sell it to RelyaTech for $29.50 each. If this offer is accepted, the supervisor's salary and all of the variable costs, including the direct labor, can be avoided. The special equipment used to make the extra large part has no salvage value or other use. The allocated general overhead represents fixed costs of the entire RelyaTech company, none of which would be avoided if the part were purchased instead of produced internally. In addition, the space used to make the extra large part could be used to make more of one of the company's other fabulous products, generating an additional segment margin of $31,000 per year for that product O) What would be the annual financial advantage (disadvantage) for RelyaTech Corp. as a result of buying the extra large part from the outside supplier?
RelyaTech Corporation makes an extra large part to use in one its fabulous products. A total of 19,000 units of this extra large part are produced and used every year. The company's costs of producing the extra large part at this level of activity are below. Direct materials Direct labor Variable manufacturing overhead Supervisor's salary Depreciation of special equipment Allocated general overhead Per Unit $4.10 $8.70 $9.20 $4.60 $3.00 $8.20 (ID#32835) An outside supplier has offered to make the extra large part and sell it to RelyaTech for $29.50 each. If this offer is accepted, the supervisor's salary and all of the variable costs, including the direct labor, can be avoided. The special equipment used to make the extra large part has no salvage value or other use. The allocated general overhead represents fixed costs of the entire RelyaTech company, none of which would be avoided if the part were purchased instead of produced internally. In addition, the space used to make the extra large part could be used to make more of one of the company's other fabulous products, generating an additional segment margin of $31,000 per year for that product O) What would be the annual financial advantage (disadvantage) for RelyaTech Corp. as a result of buying the extra large part from the outside supplier?
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
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Process Costing
Process costing is a sort of operation costing which is employed to determine the value of a product at each process or stage of producing process, applicable where goods produced from a series of continuous operations or procedure.
Job Costing
Job costing is adhesive costs of each and every job involved in the production processes. It is an accounting measure. It is a method which determines the cost of specific jobs, which are performed according to the consumer’s specifications. Job costing is possible only in businesses where the production is done as per the customer’s requirement. For example, some customers order to manufacture furniture as per their needs.
ABC Costing
Cost Accounting is a form of managerial accounting that helps the company in assessing the total variable cost so as to compute the cost of production. Cost accounting is generally used by the management so as to ensure better decision-making. In comparison to financial accounting, cost accounting has to follow a set standard ad can be used flexibly by the management as per their needs. The types of Cost Accounting include – Lean Accounting, Standard Costing, Marginal Costing and Activity Based Costing.
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Transcribed Image Text:RelyaTech Corporation makes an extra large part to use in one its fabulous products. A total of 19,000 units of this extra large part are
produced and used every year. The company's costs of producing the extra large part at this level of activity are below.
Direct materials
Direct labor
Variable manufacturing overhead
Supervisor's salary
Depreciation of special equipment
Allocated general overhead
Per
Unit
$4.10
$8.70
$9.20
$4.60
$3.00
$8.20
(ID#32835)
An outside supplier has offered to make the extra large part and sell it to RelyaTech for $29.50 each.
If this offer is accepted, the supervisor's salary and all of the variable costs, including the direct labor, can be avoided.
The special equipment used to make the extra large part has no salvage value or other use.
The allocated general overhead represents fixed costs of the entire RelyaTech company, none of which would be avoided if the part were
purchased instead of produced internally. In addition, the space used to make the extra large part could be used to make more of one of the
company's other fabulous products, generating an additional segment margin of $31,000 per year for that product
O) What would be the annual financial advantage (disadvantage) for RelyaTech Corp, as a result of buying the extra large part from the outside
supplier?
Transcribed Image Text:Multiple Choice
($102,000)
$(24,100)
$31,000
($172,900)
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