Survey Of Accounting
5th Edition
ISBN: 9781259631122
Author: Edmonds, Thomas P.
Publisher: Mcgraw-hill Education,
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Textbook Question
Chapter 13, Problem 11E
Exercise 6-11A Establishing price for an outsourcing decision
Levesque Company makes and sells lawn mowers for which it currently makes the engines. It has an opportunity to purchase the engines from a reliable manufacturer. The annual costs of making the engines are shown here.
| Cost of materials (20.000 units × $26) | $ 520,000 |
| Labor (20,000 units × $20) | 400,000 |
| Depredation on manufacturing equipment* | 42,000 |
| Salary of supervisor of engine production | 85,000 |
| Rental cost of equipment used to make engines | 23,000 |
| Allocated portion of corporate-level facility-sustaining costs | 80,000 |
| Total cost to make 20,000 engines | $1,150,000 |
| *The equipment has a book value of $90,000 but its market value is zero. | |
Required
a. Determine the maximum price per unit that Levesque would be willing to pay for the engines.
b. Would the price computed in Requirement a change if production increased to 24,000 units? Support your answer with appropriate computations.
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Homwork Question 6
MSI is considering outsourcing the production of the handheld control module used with some of its products. The company has received a bid from Monte Legend Co. (MLC) to produce 10,000 units of the module per year for $16 each. The following information pertains to MSI’s production of the control modules: Direct materials $9Direct labor $4Variable manufacturing overhead $2Fixed manufacturing overhead $3Total cost per unit $18
MSI has determined that it could eliminate all variable costs if the control modules were produced externally, but none of the fixed overhead is avoidable. At this time, MSI has no specific use in mind for the space that is currently dedicated to the control module production.
1. Compute the difference in cost between making and buying the control module.
Exercise 6-13A (Algo) Outsourcing decision affected by opportunity costs LO 6-3
Rooney Electronics currently produces the shipping containers it uses to deliver the electronics products it sells. The monthly cost of
producing 9,300 containers follows.
Unit-level materials
Unit-level labor
Unit-level overhead
Product-level costs*
Allocated facility-level costs
$ 5,100
6,700
3,400
8,700
27,500
*One-third of these costs can be avoided by purchasing the containers.
Russo Container Company has offered to sell comparable containers to Rooney for $2.50 each.
Required
a. Calculate the total relevant cost. Should Rooney continue to make the containers?
b. Rooney could lease the space it currently uses in the manufacturing process. If leasing would produce $12,300 per month, calculate
the total avoidable costs. Should Rooney continue to make the containers?
a. Total relevant cost
a. Should Rooney continue to make the containers?
b. Total avoidable cost
Yes
b. Should Rooney continue to make the…
Question 4
You are contemplating leaving your full-time employment to concentrate your ability on the marketing of a new low-energy portable heater. You have spoken to a group of manufacturers of similar product, and you have produced the following data based upon the production of 1200 heaters in the six months to December 31, 2021.
R R
Unit selling price 160
Less: Direct materials 50
Direct labour 30
Fixed Overheads:
Admin 4.00
Rent 7.50
Rates…
Chapter 13 Solutions
Survey Of Accounting
Ch. 13 - Prob. 1QCh. 13 - Prob. 2QCh. 13 - Prob. 3QCh. 13 - Prob. 4QCh. 13 - Prob. 5QCh. 13 - Prob. 6QCh. 13 - Prob. 7QCh. 13 - Prob. 8QCh. 13 - Prob. 9QCh. 13 - Prob. 10Q
Ch. 13 - Prob. 11QCh. 13 - Prob. 12QCh. 13 - Prob. 13QCh. 13 - Prob. 14QCh. 13 - Prob. 15QCh. 13 - Prob. 16QCh. 13 - Prob. 17QCh. 13 - Prob. 18QCh. 13 - Prob. 19QCh. 13 - Prob. 1ECh. 13 - Prob. 2ECh. 13 - Prob. 3ECh. 13 - Prob. 4ECh. 13 - Exercise 6-5AOpportunity costs Norman Dowd owns...Ch. 13 - Prob. 6ECh. 13 - Prob. 7ECh. 13 - Prob. 8ECh. 13 - Prob. 9ECh. 13 - Prob. 10ECh. 13 - Exercise 6-11AEstablishing price for an...Ch. 13 - Exercise 6-12AOutsourcing decision with...Ch. 13 - Exercise 6-13AOutsourcing decision affected by...Ch. 13 - Prob. 14ECh. 13 - Exercise 6-15ASegment elimination decision Dudley...Ch. 13 - Prob. 16ECh. 13 - Exercise 6-17AAsset replacementopportunity cost...Ch. 13 - Prob. 18ECh. 13 - Exercise 6-19A Asset replacement decision Mead...Ch. 13 - Exercise 6-20A Asset replacement decision Kahn...Ch. 13 - Exercise 6-21A Annual versus cumulative data for...Ch. 13 - Problem 6-23A Context-sensitive relevance Required...Ch. 13 - Problem 6-24A Context-sensitive relevance...Ch. 13 - Problem 6-25A Effect of order quantity on special...Ch. 13 - Problem 6-26A Effects of the level of production...Ch. 13 - Problem 6-28A Eliminating a segment Western Boot...Ch. 13 - Effect of activity level and opportunity cost on...Ch. 13 - Problem 6-30A Comprehensive problem including...Ch. 13 - Prob. 29PCh. 13 - ATC 6-1 Business Application Case Analyzing...Ch. 13 - ATC 6-2 Group Assignment Relevance and cost...Ch. 13 - Prob. 3ATCCh. 13 - Prob. 4ATCCh. 13 - Prob. 5ATC
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