Sandhill has unused productive capacity that is expected to continue indefinitely: management has concluded that some of this capacity could be used to assemble the bikes and sell them at $491 each. Assembling the bikes will increase direct materials by $5 per bike and direct labor by $10 per bike. Additional variable overhead will be incurred at the normal rates, but there will be no additional fixed overhead as a result of assembling the bikes.
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- Futura Company purchases the 67,000 starters that it installs in its standard line of farm tractors from a supplier for the price of $11.30 per unit. Due to a reduction in output, the company now has idle capacity that could be used to produce the starters rather than buying them from an outside supplier. However, the company's chief engineer is opposed to making the starters because the production cost per unit is $12.00 as shown below: Direct materials Direct labor Supervision Depreciation Variable manufacturing overhead Rent Total product cost Per Unit $ 5.00 3.20 1.60 1.20 0.60 0.40 $ 12.00 Total $ 107,200 $ 80,400 $ 26,800 If Futura decides to make the starters, a supervisor would have to be hired (at a salary of $107,200) to oversee production. However, the company has sufficient idle tools and machinery such that no new equipment would have to be purchased. The rent charge above is based on space utilized in the plant. The total rent on the plant is $87,000 per period.…Futura Company purchases the 76,000 starters that it installs in its standard line of farm tractors from a supplier for the price of $12.60 per unit. Due to a reduction in output, the company now has idle capacity that could be used to produce the starters rather than buying them from an outside supplier. However, the company's chief engineer is opposed to making the starters because the production cost per unit is $13.70 as shown below: Direct materials Direct labor Supervision Depreciation Variable manufacturing overhead Rent Total product cost Per Unit $ 6.00 3.50 1.80 1.40 0.60 0.40 $ 13.70 Financial advantage Total $ 221,600 $ 136,800 $ 106,400 If Futura decides to make the starters, a supervisor would have to be hired (at a salary of $136,800) to oversee production. However, the company has sufficient idle tools and machinery such that no new equipment would have to be purchased. The rent charge above is based on space utilized in the plant. The total rent on the plant is $86,000…Meman
- A company makes 36,000 motors to be used in the production of its blender. The average cost per motor at this level of activity is: Direct materials Direct labor Variable manufacturing overhead Fixed manufacturing overhead An outside supplier recently began producing a comparable motor that could be used in the blender. The price offered to the company for this motor is $23.95. There would be no other use for the production facilities and none of the fixed manufacturing overhead cost could be avoided. The annual financial advantage (disadvantage) for the company as a result of making the motors rather than buying them from the outside supplier would be: Multiple Choice O O O ($68,400) $214,200 $9.50 $ 8.50 $ 3.45 $ 4.40 90,000 $158,400Futura Company purchases the 66,000 starters that it installs in its standard line of farm tractors from a supplier for the price of $10.50 per unit. Due to a reduction in output, the company now has idle capacity that could be used to produce the starters rather than buying them from an outside supplier. However, the company's chief engineer is opposed to making the starters because the production cost per unit is $11.40 as shown below: Direct materials Direct labor Supervision Depreciation Variable manufacturing overhead Rent Total product cost Per Unit $ 4.00 3.50 1.90 1.10 0.50 0.40 $11.40 Total $ 125,400 $ 72,600 $ 26,400 If Futura decides to make the starters, a supervisor would have to be hired (at a salary of $125,400) to oversee production. However, the company has sufficient idle tools and machinery such that no new equipment would have to be purchased. The rent charge above is based on space utilized in the plant. The total rent on the plant is $88,000 per period.…Futura Company purchases the 71,000 starters that it installs in its standard line of farm tractors from a supplier for the price of $12.70 per unit. Due to a reduction in output, the company now has idle capacity that could be used to produce the starters rather than buying them from an outside supplier. However, the company's chief engineer is opposed to making the starters because the production cost per unit is $12.90 as shown below: Direct materials Direct labor Supervision Depreciation Variable manufacturing overhead Rent Total product cost Per Unit $ 6.00 3.00 1.50 1.30 0.70 0.40 $ 12.90 Total $ 106,500 $ 92,300 $ 28,400 If Futura decides to make the starters, a supervisor would have to be hired (at a salary of $106,500) to oversee production. However, the company has sufficient idle tools and machinery such that no new equipment would have to be purchased. The rent charge above is based on space utilized in the plant. The total rent on the plant is $84,000 per period.…
- Lakeside Incorporated produces a product that currently sells for $46.80 per unit. Current production costs per unit include direct materials, $13; direct labor, $15; varlable overhead, $6.50; and fixed overhead, $6.50. Product engineering has determined that a certain part of the product conversion process could be outsourced. Raw material costs would not be affected, but direct labor and variable overhead costs would be reduced by 30%. No other opportunity is currently feasible for unused production capacity. Required: a. What would be the net cost advantage or disadvantage if Lakeview decided to outsource part of the conversion process at a cost of $5.20 per unit? Note: Do not round your Intermediate calculations. Round your final answer to 2 decimal places. b. Should Lakeside outsource part of the conversion process at a cost of $5.20 per unit? a. b. Should Lakeside outsource conversion process at this cost?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?…Artisan Metalworks has a bottleneck in their production that occurs within the engraving department. Jamal Moore, the COO, is considering hiring an extra worker, whose salary will be $54,000 per year, to solve the problem. With this extra worker, the company could produce and sell 2,900 more units per year. Currently, the selling price per unit is $25.00 and the cost per unit is $7.50. Direct materials $3.40 Direct labor Variable overhead Fixed overhead (primarily depreciation of equipment) Total 1.00 0.40 2.70 $7.50 Using the Information provided, calculate the annual financial Impact of hiring the extra worker. Profit $ ✓ Increase
- Futura Company purchases the 60,000 starters that it installs in its standard line of farm tractors from a supplier for the price of $10.40 per unit. Due to a reduction in output, the company now has idle capacity that could be used to produce the starters rather than buying them from an outside supplier. However, the company’s chief engineer is opposed to making the starters because the production cost per unit is $11.20 as shown below: Per Unit Total Direct materials $ 5.00 Direct labor 2.50 Supervision 1.70 $ 102,000 Depreciation 1.10 $ 66,000 Variable manufacturing overhead 0.40 Rent 0.50 $ 30,000 Total product cost $ 11.20 If Futura decides to make the starters, a supervisor would have to be hired (at a salary of $102,000) to oversee production. However, the company has sufficient idle tools and machinery such that no new equipment would have to be purchased. The rent charge above is based on space utilized in the plant. The total rent on the…Futura Company purchases the 71,000 starters that it installs in its standard line of farm tractors from a supplier for the price of $13.00 per unit. Due to a reduction in output, the company now has idle capacity that could be used to produce the starters rather than buying them from an outside supplier. However, the company's chief engineer is opposed to making the starters because the production cost per unit is $14.20 as shown below: Direct materials Direct labor Supervision Depreciation Variable manufacturing overhead Rent Total product cost Per Unit Total $ 7.00 3.00 B 1.90 $ 134,900 1.40 $ 99,400 0.50 0.40 $ 28,400 $14.20 If Futura decides to make the starters, a supervisor would have to be hired (at a salary of $134,900) to oversee production. However, the company has sufficient idle tools and machinery such that no new equipment would have to be purchased. The rent charge above is based on space utilized in the plant. The total rent on the plant is $82,000 per period.…Goshford Company produces a single product and has capacity to produce 100,000 units per month. Costs to produce its current sales of 80,000 units follow. The regular selling price of the product is $100 per unit. Management is approached by a new customer who wants to purchase 20,000 units of the product for $75 per unit. If the order is accepted, there will be no additional fixed manufacturing overhead and no additional fixed selling and administrative expenses. The customer is not in the company’sregular selling territory, so there will be a $5 per unit shipping expense in addition to the regular variable selling and administrative expenses. Determine whether management should accept or reject the new business.