Survey Of Accounting
5th Edition
ISBN: 9781259631122
Author: Edmonds, Thomas P.
Publisher: Mcgraw-hill Education,
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Chapter 13, Problem 13E
Exercise 6-13A Outsourcing decision affected by opportunity costs
Omron Electronics currently produces the shipping containers it uses to deliver the electronics products it sells. The monthly cost of producing 10,000 containers follows:
| Unit-level materials | $ 7,500 |
| Unit-level labor | 8,250 |
| Unit-level |
5,250 |
| Product-level costs* | 13,500 |
| Allocated facility-level costs | $33,000 |
| *One-third of these costs can be avoided by purchasing the containers. | |
Russo Container Company has offered to sell comparable containers to Omron for $3.00 each.
Required
a. Should Omron continue to make the containers? Support your answer with appropriate computations.
b. Omron could lease the space it currently uses in the manufacturing process. If leasing would produce $8,000 per month, would your answer to Requirement a be different? Explain.
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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 9
QRC Company is trying to decide which one of two alternatives it will accept. The costs and revenues associated with each alternative are listed below:
Alternative A
Alternative B
Projected revenue
$
62,500
$
75,000
Unit-level costs
12,500
18,000
Batch-level costs
6,250
12,000
Product-level costs
7,500
8,500
Facility-level costs
5,000
6,250
What is the differential revenue for this decision?
$62,500
$25,000
$75,000
$12,500
Exercise 6-11A (Static) Establishing price for an outsourcing decision LO 6-3
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)
Labor (20,000 units × $20)
Depreciation on manufacturing equipment*
Salary of supervisor of engine production
Rental cost of equipment used to make engines
Allocated portion of corporate-level facility-sustaining costs
Total cost to make 20,000 engines
*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. Determine the maximum price per unit that Levesque would be willing to pay for the engines, if production increased to 24,000
units.
Note: For all requirements, round intermediate and final answers to 2 decimal places.
a. Maximum…
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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