Aril Industries is a multiproduct company that currently manufactures 30,000 units of Part 730 each month for use in production. The facilities now being used to produce Part 730 have fixed monthly
If Aril Industries continues to use 30,000 units of Part 730 each month, it would realize a net benefit by purchasing Part 730 from an outside supplier only if the supplier’s unit price is less than:
- a. $12.00.
- b. $12.50.
- c. $13.00.
- d. $14.00.
Trending nowThis is a popular solution!
Chapter 11 Solutions
Managerial Accounting
- Dimitri Designs has capacity to produce 30,000 desk chairs per year and is currently selling all 30,000 for $240 each. Country Enterprises has approached Dimitri to buy 800 chairs for $210 each. Dimitris normal variable cost is $165 per chair, including $50 per unit in direct labor per chair. Dimitri can produce the special order on an overtime shift, which means that direct labor would be paid overtime at 150% of the normal pay rate. The annual fixed costs will be unaffected by the special order and the contract will not disrupt any of Dimitris other operations. What will be the impact on profits of accepting the order?arrow_forwardMaterials used by the Instrument Division of Ziegler Inc. are currently purchased from outside suppliers at a cost of 1,350 per unit. However, the same materials are available from the Components Division. The Components Division has unused capacity and can produce the materials needed by the Instrument Division at a variable cost of 900 per unit. a. If a transfer price of 1,000 per unit is established and 75,000 units of materials are transferred, with no reduction in the Components Divisions current sales, how much would Ziegler Inc.s total operating income increase? b. How much would the Instrument Divisions operating income increase? c. How much would the Components Divisions operating income increase?arrow_forwardMake or Buy Desert Industries manufactures 5,000 units of Part X300 each month for use in production. The facilities now being used to produce Part X300 have fixed monthly overhead costs of $45,000, and a theoretical capacity to produce 7,000 units per month. If Desert were to buy Part X300 from an outside supplier, the facilities would be idle and 80% of the fixed costs would continue to be incurred. There are no alternative uses for the production facilities. The variable production costs of Part X300 are $25 per unit. Fixed overhead is allocated based on planned production levels. If Desert Industries continues to use 5,000 units of Part X300 each month, it would realize a net benefit by purchasing Part X300 from an outside supplier only if the supplier’s unit price is less than what amount?$Answerarrow_forward
- A company produces 300 microwave ovens per month, each of which includes one electrical circuit. The company currently manufactures the circuit in - house but is considering outsourcing the circuits at a contract cost of $48 each. Currently, the cost of producing circuits in – house includes variable costs of $26 per circuit and fixed costs of $5,000 per month. Assume the company could not reduce any fixed costs by outsourcing and that there is no alternative use for the facilities presently being used to make circuits. If the company outsources, operating income will: O A. decrease by $6,600 B. decrease by $7,800 C. increase by $14,400 D. stay the samearrow_forwardRegis 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:arrow_forwardABC Company (ABC) currently produces 6,000 units of M1 (a component uses in many electric appliances) per year under normal capacity and sells M1 at $66 per unit. The company is considering the possibility to buy a similar component from an outside supplier. If ABC accepts the supplier’s offer, all variable manufacturing costs will be eliminated, but 60% of the fixed manufacturing overhead will have to be absorbed by other products. The released factory equipment could be used to produce a net income of $66,000. The cost to produce M1 is as follows.Direct materials $105,000 Direct labor $45,000Total overhead $90,000. The total overhead costs include variable handling costs of $5 per unit. The remainder of the overhead costs consists of 10% variable costs and 90% fixed costs. A very good foreign manufacturer, 3Z Company (3Z) has offered to sell the component at $36 per unit, plus $0.5 shipping cost per unit. GQ Company (GQ), a new local manufacturer, has alsooffered to…arrow_forward
- A large electronics manufacturer is considering outsourcing the manufacturing of a diaphragm used in its large speaker. The company estimates that annual fixed costs of manufacturing the part in-house, which include equipment, maintenance, and management, amounts to$6.9million. The variable costs of labor and material are$7per unit. The company has an offer from a major subcontractor to produce the part for \$12 per unit. However, the subcontractor wants the company to share in the costs of the equipment. The electronics company estimates that the total cost would be$3.4million, which also includes management oversight for the new supply contact. The company must consume more than diaphragms to make the manufacturing the part in-house option least costly. (Enter your response rounded up to the nearest whole number.).arrow_forwardGilberto Company currently manufactures 78,000 units per year of one of its crucial parts. Variable costs are $2.60 per unit, fixed costs related to making this part are $88,000 per year, and allocated fixed costs are $75,000 per year. Allocated fixed costs are unavoidable whether the company makes or buys the part. Gilberto is considering buying the part from a supplier for a quoted price of $3.80 per unit guaranteed for a three-year period. Calculate the total incremental cost of making 78,000 and buying 78,000 units. Should the company continue to manufacture the part, or should it buy the part from the outside supplier?arrow_forwardGilberto Company currently manufactures 65,000 units per year of one of its crucial parts. Variable costs are $1.95 per unit, fixed costs related to making this part are $75,000 per year, and allocated fixed costs are $62,000 per year. Allocated fixed costs are unavoidable whether the company makes or buys the part. Gilberto is considering buying the part from a supplier for a quoted price of $3.25 per unit guaranteed for a three-year period. Should the company continue to manufacture the part, or should it buy the part from the outside supplier?arrow_forward
- 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.arrow_forwardGilberto Company currently manufactures 79,000 units per year of one of its crucial parts. Variable costs are $2.65 per unit, fixed costs related to making this part are $89,000 per year, and allocated fixed costs are $76,000 per year. Allocated fixed costs are unavoidable whether the company makes or buys the part. Gilberto is considering buying the part from a supplier for a quoted price of $3.85 per unit guaranteed for a three-year period. Calculate the total incremental cost of making 79,000 and buying 79,000 units. Should the company continue to manufacture the part, or should it buy the part from the outside supplier? Complete this question by entering your answers in the tabs below. Outside Supplier Calculate the total incremental cost of making 79,000 units. (Round cost per unit answers to 2 decimal places.) Incremental Costs to Make Relevant Amount per Relevant Fixed Unit Costs Costs to Make Costs to Buy Variable cost per unit Fixed manufacturing costs Total incremental cost…arrow_forwardHoboken Industries currently manufactures 30,000 units of part MR24 each month for use in production of several of its products. The facilities now used to produce part MR24 have a fixed monthly cost of $150,000 and a capacity to produce 84,000 units per month. If the company were to buy part MR24 from an outside supplier, the facilities would be idle, but its fixed costs would continue at 40 percent of their present amount. The variable production costs of part MR24 are $11 per unit.Required:1. If Hoboken Industries continues to use 30,000 units of part MR24 each month, it would realize a net benefit by purchasing part MR24 from an outside supplier only if the supplier’s unit price is less than what amount?2. If Hoboken Industries is able to obtain part MR24 from an outside supplier at a unit purchase price of $12.875, what is the monthly usage at which it will be indifferent between purchasing and making part MR24?arrow_forward
- Managerial AccountingAccountingISBN:9781337912020Author:Carl Warren, Ph.d. Cma William B. TaylerPublisher:South-Western College PubManagerial Accounting: The Cornerstone of Busines...AccountingISBN:9781337115773Author:Maryanne M. Mowen, Don R. Hansen, Dan L. HeitgerPublisher:Cengage LearningPrinciples of Accounting Volume 2AccountingISBN:9781947172609Author:OpenStaxPublisher:OpenStax College