Required:1. Assuming that 70,000 drums are needed each year, what is the financial advantage (disadvantage) of buying the drums froman outside supplier?2. Assuming that 140,000 drums are needed each year, what is the financial advantage (disadvantage) of buying the drums froman outside supplier?3. Assuming that 175,000 drums are needed each year, what is the financial advantage (disadvantage) of buying the drums froman outside supplier?(For all requirements, enter any "disadvantages" as a negative value. Do not round intermediate calculations. Do not leaveany cells blank.)Production Needs1.70,000 drums2. 140,000 drums3. 175,000 drumsFinancial advantage(disadvantage) ofbuying the drums4/ akAaces"In my opinion, we ought to stop making our own drums and accept that outside supplier's offer," said Wim Niewindt, managingdirector of Antilles Refining, N.V., of Aruba. "At a price of $21 per drum, we would be paying $6.00 less than it costs us tomanufacture the drums in our own plant. Since we use 70,000 drums a year, that would be an annual cost savings of $420,000"Antilles Refining's current cost to manufacture one drum is given below (based on 70,000 drums per year):Direct materialsDirect laborVariable overheadFixed overhead ($3.30 general company overhead,$1.85 depreciation, and $1.10 supervision)Total cost per drum$11.008.501.256.25$ 27.00A decision about whether to make or buy the drums is especially important at this time because the equipment being used tomake the drums is completely worn out and must be replaced. The choices facing the company are:Alternative 1: Rent new equipment and continue to make the drums. The equipment would be rented for $231,000 per year.Alternative 2: Purchase the drums from an outside supplier at $21 per drum.The new equipment would be more efficient than the equipment that Antilles Refining has been using and, according to themanufacturer, would reduce direct labor and variable overhead costs by 20%. The old equipment has no resale value.Supervision cost ($77,000 per year) and direct materials cost per drum would not be affected by the new equipment. The newequipment's capacity would be 175,000 drums per year.The company's total general company overhead would be unaffected by this decision.

Only costs that will be impacted by the particular management decision under consideration are…

Required: 1. Assuming that 70,000 drums are needed each year, what is the financial advantage (disadvantage) of buying the drums from an outside supplier? 2. Assuming that 140,000 drums are needed each year, what is the financial advantage (disadvantage) of buying the drums from an outside supplier? 3. Assuming that 175,000 drums are needed each year, what is the financial advantage (disadvantage) of buying the drums from an outside supplier? (For all requirements, enter any "disadvantages" as a negative value. Do not round intermediate calculations. Do not leave any cells blank.) Production Needs 1.70,000 drums 2. 140,000 drums 3. 175,000 drums Financial advantage (disadvantage) of buying the drums

Required: 1. Assuming that 70,000 drums are needed each year, what is the financial advantage (disadvantage) of buying the drums from an outside supplier? 2. Assuming that 140,000 drums are needed each year, what is the financial advantage (disadvantage) of buying the drums from an outside supplier? 3. Assuming that 175,000 drums are needed each year, what is the financial advantage (disadvantage) of buying the drums from an outside supplier? (For all requirements, enter any "disadvantages" as a negative value. Do not round intermediate calculations. Do not leave any cells blank.) Production Needs 1.70,000 drums 2. 140,000 drums 3. 175,000 drums Financial advantage (disadvantage) of buying the drums

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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"In my opinion, we ought to stop making our own drums and accept that outside supplier's offer," said Wim Niewindt, managing director of Antilles Refining, N.V., of Aruba. "At a price of $20 per drum, we would be paying $4.45 less than it costs us to manufacture the drums in our own plant. Since we use 65,000 drums a year, that would be an annual cost savings of $289,250," Antilles Refining's current cost to manufacture one drum is given below (based on 65,000 drums per year): Direct materials $10.95 Direct labor 7.00 Variable overhead 1.60 Fixed overhead ($2.50 general company overhead, $1.60 depreciation, and $0.80 supervision) 4.90 Total cost per drun $24.45 A decision about whether to make or buy the drums is especially important at this time because the equipment being used to make the drums is completely worn out and must be replaced. The choices facing the company are: Alternative 1: Rent new equipment and continue to make the drums. The equipment would be rented for $156,000…
“In my opinion, we ought to stop making our own drums and accept that outside supplier’s offer,” said Wim Niewindt, managing director of Antilles Refining, N.V., of Aruba. “At a price of $20 per drum, we would be paying $5.45 less than it costs us to manufacture the drums in our own plant. Since we use 80,000 drums a year, that would be an annual cost savings of $436,000.” Antilles Refining’s current cost to manufacture one drum is given below (based on 80,000 drums per year): Direct materials $ 12.00 Direct labor 6.50 Variable overhead 1.50 Fixed overhead ($2.90 general company overhead, $1.80 depreciation, and $0.75 supervision) 5.45 Total cost per drum $ 25.45 A decision about whether to make or buy the drums is especially important at this time because the equipment being used to make the drums is completely worn out and must be replaced. The choices facing the company are: Alternative 1: Rent new equipment and continue to make the drums. The equipment would be…
"In my opinion, we ought to stop making our own drums and accept that outside supplier's offer," said Wim Niewindt, managing director of Antilles Refining, N.V., of Aruba. "At a price of $19 per drum, we would be paying $5.35 less than it costs us to manufacture the drums in our own plant. Since we use 60,000 drums a year, that would be an annual cost savings of $321,000." Antilles Refining's current cost to manufacture one drum is given below (based on 60,000 drums per year): Direct materials Direct labor Variable overhead Fixed overhead ($3.00 general company overhead, $1.70 depreciation, and $0.70 supervision) Total cost per drum A decision about whether to make or buy the drums is especially important at this time because the equipment being used to make the drums is completely worn out and must be replaced. The choices facing the company are: Alternative 1: Rent new equipment and continue to make the drums. The equipment would be rented for $168,000 per year. Alternative 2:…
We ought to stop making our own drums and accept that outside supplier’s offer,” said Wim Niewindt, managing director of Antilles Refining, N.V., of Aruba. “At a price of $20 per drum, we would be paying $5.25 less than it costs us to manufacture the drums in our own plant. Because we use 95,000 drums a year, that equals an annual cost savings of $498,750.” Antilles Refining’s current cost to manufacture one drum is given below (based on 95,000 drums per year): Direct materials $ 10.60 Direct labor 6.50 Variable overhead 1.50 Fixed overhead ($3.90 general company overhead, $1.55 depreciation, and $1.20 supervision) 6.65 Total cost per drum $ 25.25 A decision about whether to make or buy the drums is especially important at this time because the equipment used to make the drums is completely worn out and must be replaced. The choices facing the company are: Alternative 1: Rent new equipment and continue to make the drums. The equipment would be rented for $342,000 per…
Make or Buy Decisions “In my opinion, we ought to stop making our own drums and accept that outside supplier’s offer,” said Wim Niewindt, managing director of Antilles Refining, N.V., of Aruba. “At a price of $18 per drum, we would be paying $5 less than it costs us to manufacture the drums in our own plant. Since we use 60,000 drums a year, that would be an annual cost savings of $300,000.” Antilles Refining’s current cost to manufacture one drum is given below (based on 60,000 drums per year): A decision about whether to make or buy the drums is especially important at this time because the equipment being used to make the drums is completely worn out and must be replaced. The choices facing the company are: Alternative 1: Rent new equipment and continue to make the drums. The equipment would be rented for $135,000 per year. Alternative 2: Purchase the drums from an outside supplier at $18 per drum. The new equipment would be more efficient than the equipment that Antilles Refining…
5. What is the maximum price that Silven should be willing to pay the outside supplier for a box of 24 tubes? 6. Instead of sales of 110,000 boxes of tubes, revised estimates show a sales volume of 150,000 boxes of tubes. At this higher sales volume, Silven would need to rent extra equipment at a cost of $60,000 per year to make the additional 40,000 boxes of tubes. Assuming that the outside supplier will not accept an order for less than 150,000 boxes of tubes, what is the financial advantage (disadvantage) in total (not per box) if Silven buys 150,000 boxes of tubes from the outside supplier? Given this new information, should Silven Industries make or buy the tubes? 7. Refer to the data in Required 6. Assume that the outside supplier will accept an order of any size for the tubes at a price of $1.70 per box. How many boxes of tubes should Silven make? How many boxes of tubes should it buy from the outside supplier?
Muscat Inc. has been manufacturing its own Camera for its Mobile Phone. The company is currently operating at 100% of capacity. Variable manufacturing overhead cost is OMR 3 per unit. The direct materials and direct labor cost per unit to make the camera are OMR 4 and OMR 6, respectively, fixed cost is OMR 50,000. Normal production is 50,000 Mobile Phone per year.
Expo Lube is interested in producing and selling an industrial line of oil filters. Market research indicates that wholesale customers are currently willing to pay $8 for similar filters, and that Expo Lube could sell 80,000 units per year at that price. a. If Expo Lube requires a 19 percent return on sales, what is its target cost for the proposed industrial line of filters? b. Assume that market research reveals several of Expo Lube’s direct competitors are likely to lower the wholesale price of similar filters to $7 per unit. To remain competitive, what will Expo Lube’s target cost have to be to maintain a 19 percent return on sales? c. At a wholesale price of $7, Expo Lube estimates that it can sell 83,100 industrial filters per year instead of 80,000 units. Assuming its target costs are attainable, how much more or less profit per year will the company earn at the $7 wholesale price compared to the initial wholesale price estimate of $8?
The Lamar Company manufactures wiring tools. The company is currently producing well below its full capacity. The Boston Company has approached Lamar with an offer to buy 15,000 tools at $1.80 each. Lamar sells its tools wholesale for $1.90 each; the average cost per unit is $1.88, of which $0.32 is fixed costs. If Lamar were to accept Boston's offer, what would be the increase in Lamar's operating profits? Multiple Choice O O $1,500. $5,100. $1,200. $3,600.
Metalex Roofing Ltd manufactures roofing sheets whose normal selling price is GH¢20 per sheet. The variable cost of producing the product is GH¢8. A foreign distributor has offered to purchase 3,000 sheets for GH¢10 per sheet. This is a one-time order that would not affect the company's regular business. The annual capacity is 10,000 sheets, but Metalex is currently producing and selling only 5,000 sheets. Fixed costs are unaffected by the order. a. Should Metalex accept the offer? b. Assuming Metalex has no spare capacity and the order will result in a loss of production of 300 sheets. Should the order be accepted?
Assume again that Andretti Company has sufficient capacity to produce 123,200 Daks each year. A customer in a foreign market wants to purchase 35,200 Daks. If Andretti accepts this order it would have to pay import duties on the Daks of $2.70 per unit and an additional $28,160 for permits and licenses. The only selling costs that would be associated with the order would be $1.60 per unit shipping cost. What is the break-even price per unit on this order? (Round your answers to 2 decimal places.)
16) please help me!! I don't know how to do it One of your Taiwanese suppliers has bid on a new line of molded plastic parts that is currently being assembled at your plant. The supplier has bid $0.10 per part, given a forecast you provided of 200,000 parts in year 1; 400,000 in year 2; and 500,000 in year 3. Shipping and handling of parts from the supplier's factory is estimated at $0.03 per unit. Additional inventory handling charges should amount to $0.005 per unit. Finally, administrative costs are estimated at $30 per month. Although your plant is able to continue producing the part, the plant would need to invest in another molding machine, which would cost $20,000. Direct materials can be purchased for $0.06 per unit. Direct labor is estimated at $0.05 per unit plus a 50 percent surcharge for benefits; indirect labor is estimated at $0.009 per unit plus 50 percent benefits. Up-front engineering and design costs will amount to $30,000. Finally, management has insisted that…