Managerial Accounting (5th Edition)
5th Edition
ISBN: 9780134128528
Author: Karen W. Braun, Wendy M. Tietz
Publisher: PEARSON
expand_more
expand_more
format_list_bulleted
Textbook Question
Chapter 8, Problem 8.52AP
Outsourcing decision given alternative use of capacity (Learning Objective 6)
Mountain Sports manufactures snowboards. Its cost of making 1,850 bindings is as follows:
Direct materials | $ 18,500 |
Direct labor | 2,900 |
Variable manufacturing |
1,285 |
Fixed manufacturing overhead | 7.100 |
Total |
$ 29,785 |
Cost per pair ($29,785 ÷ 1,850) | $ 16.10 |
Suppose an outside supplier will sell bindings to Mountain Sports for $14 each. Mountain Sports will pay $1.00 per unit to transport the bindings to its manufacturing plant, where it will add its own logo at a cost of $0.70 per binding.
Requirements
- 1. Mountain Sports’ accountants predict that purchasing the bindings from the outside supplier will enable the company to avoid $2,000 of fixed overhead. Prepare an analysis to show whether the company should make or buy the bindings.
- 2. The facilities freed by purchasing bindings from the outside supplier can be used to manufacture another product that will contribute $2,800 to profit. Total fixed costs will be the same as if Mountain Sports had produced the bindings. Show which alternative makes the best use of Mountain Sports facilities: (a) make bindings, (b) buy bindings and leave facilities idle, or (c) buy bindings and make another product.
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solutionStudents have asked these similar questions
FNG Paint (Pty) Ltd produces finger paint and sells them to pre‐schools.
The following information relates to a set of finger paint. A set of finger paint is considered to be one unit.
Direct labour needed for the first set of paint 4 hoursDirect labour costs per unit R30 per hourDirect material costs per unit R25Total Fixed costs R2 000Learning curve 80%
Using the learning curve theory and information provided above, calculate the expected average cost for one set of paint should four and sixteen sets be produced, respectively.
Round off to two decimal places.
eleam.squ.euu.om/mod/qu12/attempt.p
learning System (Academic)
stion 3
Company XYZ uses machine hours to allocate its manufacturing overhead. The company
estimates that total machine hours to be operated next year are 190,000 hours. The estimated
variable overhead is $9 per hour and the estimated fixed overhead costs are $152,000. Calculate
wer saved
ked out of 2
the predetermined overhead rate.
lag question
Select one:
O a. $9.80
O b. $0.80
O c. $10.80
O d. $0.10
O e. None of the answers given
Clear my choice
dy Home
CengageNOWv2| Online teachin x
/takeAssignment/takeAssignmentMain.do?invoker=&takeAssignmentSessionLocator=&inprogress=false
Xander Studios holds a sculpting class for which it charges students $250. The costs consist of the following:
Variable costs per student:
Sculpting supplies
$100
Enrollment costs
50
Fixed costs for the course:
Instructor's salary
$1,000
Rental cost of the classroom
500
The break-even number of students is
Oa. 2
ОБ. 12
Oc. 20
Od. 11
Chapter 8 Solutions
Managerial Accounting (5th Edition)
Ch. 8 - Prob. 1QCCh. 8 - (Learning Objective 1) Keys to making short-term...Ch. 8 - (Learning Objective 2) Which is true of...Ch. 8 - (Learning Objective 3) Which of the following...Ch. 8 - Prob. 5QCCh. 8 - Prob. 6QCCh. 8 - (Learning Objective 4) A segment margin is the a....Ch. 8 - (Learning Objective 5) When resources are...Ch. 8 - (Learning Objective 6) Which of the following is...Ch. 8 - Prob. 10QC
Ch. 8 - Determine relevance of information (Learning...Ch. 8 - Prob. 8.2SECh. 8 - Prob. 8.3SECh. 8 - Prob. 8.4SECh. 8 - Prob. 8.5SECh. 8 - Prob. 8.6SECh. 8 - Prob. 8.7SECh. 8 - Prob. 8.8SECh. 8 - Product mix decision: Unlimited demand (Learning...Ch. 8 - Prob. 8.10SECh. 8 - Outsourcing production decision (Learning...Ch. 8 - Relevant information for outsourcing delivery...Ch. 8 - Prob. 8.13SECh. 8 - Prob. 8.14SECh. 8 - Prob. 8.15SECh. 8 - Determine relevant and irrelevant information...Ch. 8 - SUSTAINABILITY ES-17A Sustainability and...Ch. 8 - Prob. 8.18AECh. 8 - Prob. 8.19AECh. 8 - Analyze special order decision (Learning Objective...Ch. 8 - Prob. 8.21AECh. 8 - Prob. 8.22AECh. 8 - Prob. 8.23AECh. 8 - Discontinuing a product line (Learning Objective...Ch. 8 - Prob. 8.25AECh. 8 - Determine product mix for retailertwo stocking...Ch. 8 - Prob. 8.27AECh. 8 - Make-or-buy product component (Learning Objective...Ch. 8 - Prob. 8.29AECh. 8 - Prob. 8.30AECh. 8 - Prob. 8.31AECh. 8 - Prob. 8.32BECh. 8 - Prob. 8.33BECh. 8 - Prob. 8.34BECh. 8 - Prob. 8.35BECh. 8 - Prob. 8.36BECh. 8 - Prob. 8.37BECh. 8 - Prob. 8.38BECh. 8 - Prob. 8.39BECh. 8 - Prob. 8.40BECh. 8 - Identify constraint, then determine product mix...Ch. 8 - Determine product mix for retailertwo stocking...Ch. 8 - Prob. 8.43BECh. 8 - Prob. 8.44BECh. 8 - Prob. 8.45BECh. 8 - Determine maximum outsourcing price (Learning...Ch. 8 - Prob. 8.47BECh. 8 - Prob. 8.48APCh. 8 - Special order decision and considerations...Ch. 8 - Prepare and use contribution margin statements for...Ch. 8 - Product mix decision under constraint (Learning...Ch. 8 - Outsourcing decision given alternative use of...Ch. 8 - Prob. 8.53APCh. 8 - Prob. 8.54BPCh. 8 - Prob. 8.55BPCh. 8 - Prepare and use contribution margin statements for...Ch. 8 - Prob. 8.57BPCh. 8 - Prob. 8.58BPCh. 8 - Prob. 8.59BPCh. 8 - Decide whether to discontinue a department...Ch. 8 - Prob. 8.61ACTCh. 8 - Outsourcing Decision at a Real Company Go to the...Ch. 8 - Prob. 8.63ACTCh. 8 - Prob. 8.64ACT
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.Similar questions
- P10-53B Determine transfer price at a manufacturer under various scenarios (Learning Objective 4) Assume the Small Components Division of Lang Manufacturing produces a video card used in the assembly of a variety of electronic products. The division's manufacturing costs, and variable selling expenses related to the video card are as follows: Cost per unit Direct materials $ 14.00 Direct labor $ 4.00 Variable manufacturing overhead $ 8.00 Fixed manufacturing overhead (at current production level) $ 9.00 Variable selling expenses $ 10.00 The Computer Division of Lang Manufacturing can use the video card produced by the Small Components Division and is interested in purchasing the video card in-house rather than buying it from an outside supplier. The Small Components Division has sufficient excess capacity with which to make the extra video cards. Because of competition, the market price for this video card is $30 regardless of whether the…arrow_forwardOutdoor Luggage, Incorporated, makes high-end hard-sided luggage for sports equipment. Data concerning three of the company's most popular models appear below: Selling price per unit Variable cost per unit Plastic injection molding machine processing time required to produce one unit Pounds of plastic pellets per unit Ski Guard Contribution marnin ner minute of the constrained resu $ 290. $185 Complete this question by entering your answers in the tabs below. Required 5 Fishing Guar $ 215 $ 90 8 minutes 9 pounds Golf Guard Iner minutearrow_forwardOutdoor Luggage, Incorporated, makes high-end hard-sided luggage for sports equipment. Data concerning three of the company's most popular models appear below. Selling price per unit Variable cost per unit Plastic injection molding machine processing time required to produce one unit Pounds of plastic pellets per unit Ski Guard $ 260 $ 100 Required 1 Required 2 6 minutes 15 pounds Required 3 Required 4 Required 5 Complete this question by entering your answers in the tabs below. Required: 1. If we assume that the total time available on the plastic injection molding machine is the constraint in the production process, how much contribution margin per minute of the constrained resource is earned by each product? Contribution margin per minute of the constrained resource 2. Which product offers the most profitable use of the plastic injection molding machine? 3. If we assume that a severe shortage of plastic pellets has required the company to cut back its production so much that its new…arrow_forward
- Wood Chuck Furniture currently manufactures rocking chairs as its main product. Each chair uses one seat cushion and one back CUSHIO and one back): Direct materials Direct labor Variable overhead Fixed overhead Total $ 1 10 Wood Chuck should 5 8 $24 Shepert Company has contacted Wood Chuck with an offer to sell it 5,000 sets of cushions for $18 each. If Wood Chuck buys the cushions, $2 of the fixed overhead per unit will be allocated to other products. Should Wood Chuck make or buy the cushions? buy to save $ per set. SUPPORTarrow_forwardTask 2: CLO4 OBJECTIVE: To enable learners to identify the relevant costs and benefits from costs and revenue information available in the financial database to aid decision making on time. REQUIREMENT: Short term decision making Question Selma Corporation uses Part PB7 in one of its products. The company's Accounting Department reports the following costs to produce 7,000 units of the PB7 that are needed every year. $ per unit Direct materials 7.00 Direct labour 6.00 Variable overhead 5.60 Supervisor's salary Depreciation of special equipment Allocated general overhead 4.70 1.50 5.40 An outside supplier has offered to make the part and sell it to the company for $28.30 each. If this offer is accepted, the supervisor's salary and all of the variable costs, including direct labor, can be avoided. The special equipment used to make the part was purchased many years ago and has no salvage value or other use. The allocated general overhead represents fixed costs of the entire company. If…arrow_forwardEasy Access Medical Supplies makes semi-motorized walking sticks. They have decided to investigate whether they should continue to make or buy the walking sticks from a supplier. Currently, the cost of producing 10,000 semi-motorized walking sticks is as follows: Cost description Per Unit $ Direct Material 15 Direct Labor 10 Variable Factory Overhead 8 Fixed Factory Overhead 15 $48 The same component can be purchased from an outside supplier for $38 per unit. If the company purchases the semi-motorized walking sticks, 20% of the fixed costs will be eliminated. Required: Using incremental analysis, determine if the component should be purchased from the outside supplier? Would your decision in part a) change if the company has the opportunity to rent out its facilities that it currently uses to manufacture the component for $5,500 ? Show full computations. Why “Opportunity Costs” are not recorded in the financial books but…arrow_forward
- Easy Access Medical Supplies makes semi-motorized walking sticks. They have decided to investigate whether they should continue to make or buy the walking sticks from a supplier. Currently, the cost of producing 10,000 semi-motorized walking sticks is as follows: Cost description Per Unit $ Direct Material 15 Direct Labor 10 Variable Factory Overhead 8 Fixed Factory Overhead 15 $48 The same component can be purchased from an outside supplier for $38 per unit. If the company purchases the semi-motorized walking sticks, 20% of the fixed costs will be eliminated. Required: a) Using incremental analysis, determine if the component should be purchased from the outside supplier? b) Would your decision in part a) change if the company has the opportunity to rent out its facilities that it currently uses to manufacture the component for $5,500 ? Show full computations. c) Why “Opportunity Costs” are not recorded…arrow_forwardAction Trainers provides a personalized training program that is popular with many companies. The munber of programs offered over the last five months, and the costs of offering these programn are as follos Jan Feb Mar April May Promams Offered 55 45 60 Costs Incuned $15,400 14,050 18,000 14,700 19,000 50 75 Usang the high low method, compute the 1ranable cost per program and the 2 total fixed cost per month Uing the least squares regressicen method compune the 3 vanable cout pe program and the 4total fied cost per moetharrow_forwardOutdoor Luggage, Inc., makes high-end hard-sided luggage for sports equipment. Data concerning three of the company’s most popular models appear below. SkiGuard GolfGuard FishingGuard Selling price per unit $ 250 $ 250 $ 255 Variable cost per unit $ 160 $ 140 $ 155 Plastic injection molding machine processingtime required to produce one unit 13 minutes 6 minutes 5 minutes Pounds of plastic pellets per unit 7 pounds 10 pounds 6 pounds Required: 1. If we assume that the total time available on the plastic injection molding machine is the constraint in the production process, how much contribution margin per minute of the constrained resource is earned by each product? 2. Which product offers the most profitable use of the plastic injection molding machine? 3. If we assume that a severe shortage of plastic pellets has required the company to cut back its production so much that its new constraint has become the total available pounds of…arrow_forward
- Vaughn, Inc. currently manufactures a wicket as its main product. Costs per unit are as follows: Direct materials and direct labor $11 Variable overhead Fixed overhead Total 5 8 $24 Saran Company has contacted Vaughn with an offer to sell it 6400 wickets for $18 each. Of Vaughn's $8 per unit fixed cost. $5 per unit is unavoidable. Should Vaughn make or buy the wickets and why? O Make because the cost savings is $12800 ◇ Buy because the cost savings is $6400 ○ Buy because the cost savings is $19200 ○ Make because the cost savings is $6400arrow_forwardOutdoor Luggage, Incorporated, makes high-end hard-sided luggage for sports equipment. Data concerning three of the company’s most popular models appear below. Ski Guard Golf Guard Fishing Guard Selling price per unit $ 240 $ 370 $ 225 Variable cost per unit $ 100 $ 255 $ 105 Plastic injection molding machine processing time required to produce one unit 7 minutes 5 minutes 7 minutes Pounds of plastic pellets per unit 15 pounds 7 pounds 10 pounds If we assume that the total time available on the plastic injection molding machine is the constraint in the production process, how much contribution margin per minute of the constrained resource is earned by each product? If we assume that a severe shortage of plastic pellets has required the company to cut back its production so much that its new constraint has become the total available pounds of plastic pellets, how much contribution margin per pound of the constrained resource is earned by each product?arrow_forwardhttps://education.aima.in/processOnlineExam.action?onlineAssignmentDefinition.id 1444118538- Google Chrome A education.aima.in/processOnlineExam.action?onlineAssignmentDefinition.id=1444118538 A company produces X, Y and Z from a raw material M. For every 100 tonnes ofM put into production it obtains 50 tons of product X, 30 tons of Y and 15 tons of Z, while 5 tons goes as waste. The selling price of X, Y and z is Rs. 40. Rs, 60 and Rs. 80 per ton. The cost of raw material M is Rs. 20 and variable processing costs are Rs. 10. Variable marketing costs are budgeted to be at the rate of 10 percent of sales value. Budgeted fixed overheads per annum are: Manufacturing - Rs. 40,000, Marketing - Rs. 30,000, and Administration - Rs. 20,000. The company intends to process 10,000 tonnes of material M in the coming year. or Question 21:- Fixed Cost is Rs. a) O 75000 b) O 60000 E c) 90000 d) O 55000 TH NO Question 22:- Contribution is Rs. a) O 12 per unit b) . 15 per unit F c)O 16 per unit d) O 18…arrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
- AccountingAccountingISBN:9781337272094Author:WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.Publisher:Cengage Learning,Accounting Information SystemsAccountingISBN:9781337619202Author:Hall, James A.Publisher:Cengage Learning,
- Horngren's Cost Accounting: A Managerial Emphasis...AccountingISBN:9780134475585Author:Srikant M. Datar, Madhav V. RajanPublisher:PEARSONIntermediate AccountingAccountingISBN:9781259722660Author:J. David Spiceland, Mark W. Nelson, Wayne M ThomasPublisher:McGraw-Hill EducationFinancial and Managerial AccountingAccountingISBN:9781259726705Author:John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting PrinciplesPublisher:McGraw-Hill Education
Accounting
Accounting
ISBN:9781337272094
Author:WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:Cengage Learning,
Accounting Information Systems
Accounting
ISBN:9781337619202
Author:Hall, James A.
Publisher:Cengage Learning,
Horngren's Cost Accounting: A Managerial Emphasis...
Accounting
ISBN:9780134475585
Author:Srikant M. Datar, Madhav V. Rajan
Publisher:PEARSON
Intermediate Accounting
Accounting
ISBN:9781259722660
Author:J. David Spiceland, Mark W. Nelson, Wayne M Thomas
Publisher:McGraw-Hill Education
Financial and Managerial Accounting
Accounting
ISBN:9781259726705
Author:John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting Principles
Publisher:McGraw-Hill Education
Inspection and Quality control in Manufacturing. What is quality inspection?; Author: Educationleaves;https://www.youtube.com/watch?v=Ey4MqC7Kp7g;License: Standard youtube license