Required information(The following information applies to the questions displayed below}Each of the following situations is independent:Make vs. Buy (Sourcing Decision) Eggers Company needs 27,000 units of a part to use in producing one of its products. If Eggersbuys the part from McMillan Company for $110 instead of making it, Eggers will not use the released facilities in another manufacturingactivity. Forty percent of the fixed overhead will continue irrespective of CEO Donald Mickey's decision. The cost data are as follows:Cost to make the part:Direct materials$ 42182630Direct laborVariable overheadFixed overhead$116Required:1. Determine which alternative is more attractive to Eggers, and by what amount.AlternativeSavingMake the partper unit

Under make or buy decisions, business has to choose between two alternatives, one is to manufacture…

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Principles of Accounting Volume 2

19th Edition

ISBN:9781947172609

Author:OpenStax

Publisher:OpenStax

Chapter10: Short-term Decision Making

Section: Chapter Questions

Problem 7EB: Oat Treats manufactures various types of cereal bars featuring oats. Simmons Cereal Company has...

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Regal Executive, Inc., produces executive motor coaches and currently manufactures the cent awnings that accompany them at these costs: The company received an offer from Saied Tents to produce the awnings for $3,200 per unit and supply 1,000 awnings for the coming years estimated production. If the company accepts this offer and shuts down production of this part of the business, production workers and supervisors will be reassigned to other areas. Assume that for the short-term decision-making process demonstrated in this problem, the companys total labor costs (direct labor and supervisor salaries) will remain the same if the bar inserts are purchased. The specialized equipment cannot be used and has no market value. However, the space occupied by the awning production can be used by a different production group that will lease it for $60,000 per year. Should the company make or buy the awnings?
Boston Executive. Inc., produces executive limousines and currently manufactures the mini-bar inset at these costs: The company received an offer from Elite Mini-Bars to produce the insets for $2,100 per Unit and supply 1,000 mini-bars for the coming years estimated production. If the company accepts this offer and shuts down production of this part of the business, production workers and supervisors will be reassigned to other areas. Assume that for the short-term decision-making process demonstrated in this problem, the companys total labor costs (direct labor and supervisor salaries) will remain the same if the bar inserts are purchased. The specialized equipment cannot be used and has no market value. However, the space occupied by the mini bar production can be used by a different production group that will lease it for $55,000 per year. Should the company make or buy the mini-bar insert?
Zena Technology sells arc computer printers for $55 per unit. Unit product costs are: A special order to purchase 15,000 arc printers has recently been received from another company and Zena has idle capacity to fill the order. Zena will incur an additional $2 per printer for additional labor costs due to a slight modification the buyer wants made to the original product. One-third of the manufacturing overhead costs is fixed and will be incurred no matter how many units are produced. When negotiating the price, what is the minimum selling price that Zena should accept for this special order?
Oat Treats manufactures various types of cereal bars featuring oats. Simmons Cereal Company has approached Oat Treats with a proposal to sell the company its top selling oat cereal bar at a price of $27,500 for 20,000 bars. The costs shown are associated with production of 20,000 oat bars currently. The manufacturing overhead consists of $3,000 of variable costs with the balance being allocated to fixed costs. Should Oat Treats make or buy the oat bars?
e. Make vs. Buy (Sourcing Decision) Eggers Company needs 20,000 units of a part to use inproducing one of its products. If Eggers buys the part from McMillan Company for $90 insteadof making it, Eggers will not use the released facilities in another manufacturing activity.Forty percent of the fixed overhead will continue irrespective of CEO Donald Mickey’s decision.The cost data are as follows:Cost to make the part:Direct materials $35Direct labor 16Variable overhead 24Fixed overhead 20$95Required1. Determine which alternative is more attractive to Eggers, and by what amount.2. What strategic factors might bear upon the ultimate decision?f. Short-Term Product-Mix Decision DVD Production
Edidas Company needs 20,000 units of Part GX to use in producing one of its products. If Edidas buys the Part GX from McMillan Company for $79 instead of making it, Edidas will not use the released facilities in another manufacturing activity. Twenty percent of the fixed overhead will continue irrespective of CEO Donald Mickey's decision. The cost per unit data are as follows: Cost to make the part Direct Materials Direct Labor (S) 30 15 Variable Overhead 20 Fixed Overhead 20 85 Required : 1. Explain which alternative is more attractive to Edidas, make or buy Part GX. 2. Assume there is new information that Edidas is negotiating to purchase cheaper raw materials from supplier (Twenty percent lower price). Is this information relevant or irrelevant? On the basis of financial considerations alone, should Edidas make or buy Part GX? Show your calculations 3. Based on requirement 2, what are relevant qualitative factors that Edidas should consider to decide whether to make or buy Part GX?…
Black Eagle Co needs 20,000 units of Part MZ to use in producing one of its products. If Black Eagle buys the Part MZ from Gomedov Co for $79 instead of making it, Black Eagle will not use the released facilities in another manufacturing activity. Twenty percent of the fixed overhead will continue irrespective of CEO Norman Wesley’s decision. Table Attached Required Explain which alternative is more attractive to Black Eagle, make or buy Part MZ Assume there is new information that Black Eagle is negotiating to purchase cheaper raw materials from supplier (20% lower price). Is this information relevant or irrelevant? (On the basis of financial considerations alone, should Black Eagle make or buy Part MZ? Show your calculations What are relevant qualitative factors that Black Eagle should consider to decide whether to make or buy Part MZ? (at least one factor for each decision [Make or Buy)
Hanson, Inc. makes 1,000 units per year of a part called a prositron for use in one of its products. Data concerning the unit production costs of prositron follow:An outside supplier has offered to sell Hanson, Inc. all of the prositrons it requires. If Hanson, Inc. decided to discontinue making the prositrons, 10% of the above fixed manufacturing overhead costs could be avoided. Required: Assume Hanson, Inc. has no alternative use for the facilities presently devoted to production of the prositrons. If the outside supplier offers to sell the prositrons for $850 each, should Hanson, Inc. accept the offer? Fully support your answer with appropriate calculations.b. Assume that Hanson, Inc. could use the facilities presently devoted to production of the prositrons to expand production of another product that would yield an additional contribution margin of $50,000 annually. What is the maximum price Hanson, Inc. should be willing to pay the outside supplier for prositrons? There is not…
The Coldplay Company is evaluating an option to outsource production of its only product, while it will continue to perform all sales, marketing and administration duties in-house. Coldplay incurs direct materials, direct labor and variable overhead costs of $20 for each unit of product it manufactures. In addition, Coldplay incurs fixed manufacturing overhead costs annually of $1,000,000 and has annual production of 100,000 units. Coldplay has determined that it could avoid all fixed manufacturing costs if it outsources production. Based on a quantitative analysis only of this information, is the following statement true or false? Coldplay should make the decision to outsource production of its only product if a third-party supplier offers to manufacture and sell to Coldplay the product for less than $30 per unit. True or False?
Daily Kneads, Inc., is considering outsourcing one of its many products rather than making it internally. The supplier will charge $20,000 for 20,000 pounds of the product. The costs per pound to make this product include: Cost per Pound $0.30 Direct Labor Direct Materials $0.60 $0.70 Allocated Unavoidable Overhead If Daily Kneads outsources, what is the savings (or loss) per pound for the company as a whole? If the amount is a loss include a negative sign (not parentheses) in your answer. "_"
! Required information [The following information applies to the questions displayed below.] Each of the following situations is independent: Make or Buy Terry Incorporated manufactures machine parts for aircraft engines. CEO Bucky Walters is considering an offer from a subcontractor to provide 2,350 units of product OP89 for $190,350. If Terry does not purchase these parts from the subcontractor, it must continue to produce them in-house with these costs: Direct materials Direct labor Variable overhead Allocated fixed overhead Required: Cost per Unit $ 35 25 23 4 1. What is the relevant cost per unit to make the product internally? 2. What is the estimated increase or decrease in short-term operating profit of producing the product internally versus purchasing the product from a supplier?
Edidas Company needs 20,000 units of Part GX to use in producing one of its products. If Edidas buys the Part GX from McMillan Company for $79 instead of making it, Edidas will not use the released facilities in another manufacturing activity. Twenty percent of the fixed overhead will continue irrespective of CEO Donald Mickey’s decision. The cost per unit data are as follows:Cost to make the part ($)Direct Materials 30Direct Labor 15Variable Overhead 20Fixed Overhead 20 85 Required1. Explain which alternative is more attractive to Edidas, make or buy Part GX. 2. Assume there is new information that Edidas is negotiating to purchase cheaper raw materials from supplier (Twenty percent lower price). Is this information relevant or irrelevant? On the basis of financial considerations alone, should Edidas make or buy Part GX? Show your calculations3. Based on requirement 2, what…

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