Managerial Accounting
3rd Edition
ISBN: 9780077826482
Author: Stacey M Whitecotton Associate Professor, Robert Libby, Fred Phillips Associate Professor
Publisher: McGraw-Hill Education
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Textbook Question
Chapter 7, Problem 9.1GBP
Analyzing Make-or-Buy Decision
Gold Dust Co. manufactures tablet PCs. The company is currently operating at capacity and has received an offer from one of its suppliers to make the 20,000 glass screens it needs for $26 each. Gold Dust’s costs to make the glass screen are $10 in direct materials and $8 in direct labor. Variable manufactures
Prepare an incremental analysis for the decision to make or buy the glass screens.
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Rundle 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
One-third of these costs can be avoided by purchasing the containers.
Russo Container Company has offered to sell comparable containers to Rundle for $2.60 each.
Required
a. Calculate the total relevant cost. Should Rundle continue to make the containers?
b. Rundle could lease the space it currently uses in the manufacturing process. If leasing would produce $11,600 per month, calculate
the total avoidable costs. Should Rundle continue to make the containers?
Answer is complete but not entirely correct.
$
a. Total relevant cost
a. Should Rundle continue to make the containers?
b. Total avoidable cost
b. Should Rundle continue to make the containers?
190.650,000
Yes
$24,180,000
$ 5,200
6,100
4,000
7,800…
Perez 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
$ 6,000
6,900
3,600
8,400
26,500
Unit-level labor
Unit-level overhead
Product-level costs*
Allocated facility-level costs
*One-third of these costs can be avoided by purchasing the containers.
Russo Container Company has offered to sell comparable containers to Perez for $2.80 each.
Required
a. Calculate the total relevant cost. Should Perez continue to make the containers?
b. Perez could lease the space it currently uses in the manufacturing process. If leasing would produce $12,800 per month, calculate
the total avoidable costs. Should Perez continue to make the containers?
a. Total relevant cost
Should Perez continue to make the containers?
b. Total avoidable cost
Should Perez continue to make the containers?
Rooney Electronics currently produces the shipping containers it uses to deliver the electronics products it sells. The monthly cost of
producing 9,100 containers follows.
Unit-level materials
Unit-level labor
Unit-level overhead
Product-level costs*
$ 5,200
6,500
3,600
9,300
26,600
Allocated facility-level costs
*One-third of these costs can be avoided by purchasing the containers.
Russo Container Company has offered to sell comparable containers to Rooney for $2.70 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 $11,500 per month, calculate
the total avoidable costs. Should Rooney continue to make the containers?
a. Total relevant cost
Should Rooney continue to make the containers?
b. Total avoidable cost
Should Rooney continue to make the containers?
Chapter 7 Solutions
Managerial Accounting
Ch. 7 - Briefly describe the five steps of the management...Ch. 7 - Suppose you are considering a part-time job to...Ch. 7 - Prob. 3QCh. 7 - What are criteria for a cost to be considered...Ch. 7 - Prob. 5QCh. 7 - Explain opportunity cost and list two opportunity...Ch. 7 - Why should opportunity costs be factored into the...Ch. 7 - Explain excess capacity and full capacity. Include...Ch. 7 - How e the concepts of full capacity and...Ch. 7 - Prob. 10Q
Ch. 7 - Prob. 11QCh. 7 - Prob. 12QCh. 7 - Suppose that you the manager of a local deli. Give...Ch. 7 - Prob. 14QCh. 7 - Prob. 15QCh. 7 - Prob. 16QCh. 7 - Prob. 17QCh. 7 - Briefly explain what happens to total variable...Ch. 7 - Prob. 19QCh. 7 - Prob. 20QCh. 7 - Prob. 21QCh. 7 - Prob. 1MCCh. 7 - Prob. 2MCCh. 7 - Prob. 3MCCh. 7 - Prob. 4MCCh. 7 - Prob. 5MCCh. 7 - Which of the following costs is not likely to be...Ch. 7 - Which of the following causes opportunity costs to...Ch. 7 - Prob. 8MCCh. 7 - Prob. 9MCCh. 7 - Prob. 10MCCh. 7 - Matching Key Terms and Concepts to Definitions A...Ch. 7 - Prob. 2MECh. 7 - Prob. 3MECh. 7 - Prob. 4MECh. 7 - Prob. 5MECh. 7 - Prob. 6MECh. 7 - Prob. 7MECh. 7 - Prob. 8MECh. 7 - Prob. 10MECh. 7 - Prob. 11MECh. 7 - Identifying Steps in Decision-Making Process...Ch. 7 - Identifying Steps in Decision-Making Process and...Ch. 7 - Identifying Relevant Costs and Calculating...Ch. 7 - Prob. 4ECh. 7 - Prob. 5ECh. 7 - Prob. 6ECh. 7 - Analyzing Keep-or-Drop Decision MSI is consider...Ch. 7 - Prob. 8ECh. 7 - Prob. 9ECh. 7 - Prob. 10ECh. 7 - Prob. 11ECh. 7 - Prob. 12ECh. 7 - Prob. 13ECh. 7 - Prob. 1.1GAPCh. 7 - Prob. 1.2GAPCh. 7 - Prob. 1.3GAPCh. 7 - Prob. 1.4GAPCh. 7 - Prob. 2.1GAPCh. 7 - Prob. 2.2GAPCh. 7 - Prob. 2.3GAPCh. 7 - Prob. 2.4GAPCh. 7 - Prob. 2.5GAPCh. 7 - Prob. 3.1GAPCh. 7 - Prob. 3.2GAPCh. 7 - Prob. 3.3GAPCh. 7 - Prob. 4.1GAPCh. 7 - Prob. 4.2GAPCh. 7 - Prob. 4.3GAPCh. 7 - Prob. 5GAPCh. 7 - Prob. 6.1GAPCh. 7 - Prob. 6.2GAPCh. 7 - Prob. 6.3GAPCh. 7 - Prob. 6.4GAPCh. 7 - Prob. 7.1GAPCh. 7 - Prob. 7.2GAPCh. 7 - Prob. 7.3GAPCh. 7 - Analyzing Special-Order Decision Camino Company...Ch. 7 - Prob. 8.2GAPCh. 7 - Analyzing Special-Order Decision Camino Company...Ch. 7 - Analyzing Make-or-Buy Decision Old Camp Company...Ch. 7 - Prob. 9.2GAPCh. 7 - Prob. 9.3GAPCh. 7 - Prob. 1.1GBPCh. 7 - Prob. 1.2GBPCh. 7 - Prob. 1.3GBPCh. 7 - Prob. 1.4GBPCh. 7 - Prob. 2.1GBPCh. 7 - Prob. 2.2GBPCh. 7 - Analyzing Make-or-Buy Decision Greenview Corp....Ch. 7 - Prob. 2.4GBPCh. 7 - Prob. 2.5GBPCh. 7 - Prob. 3.1GBPCh. 7 - Prob. 3.2GBPCh. 7 - Prob. 3.3GBPCh. 7 - Prob. 4.1GBPCh. 7 - Prob. 4.2GBPCh. 7 - Prob. 4.3GBPCh. 7 - Prob. 5GBPCh. 7 - Prob. 6.1GBPCh. 7 - Prob. 6.2GBPCh. 7 - Prob. 6.3GBPCh. 7 - Prob. 6.4GBPCh. 7 - Analyzing Sell-or-Process-Further Decision Golden...Ch. 7 - Prob. 7.2GBPCh. 7 - Prob. 7.3GBPCh. 7 - Prob. 8.1GBPCh. 7 - Prob. 8.2GBPCh. 7 - Prob. 8.3GBPCh. 7 - Analyzing Make-or-Buy Decision Gold Dust Co....Ch. 7 - Prob. 9.2GBPCh. 7 - Prob. 9.3GBP
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