Bramble Company manufactures widgets. Blossom Company has approached Bramble with a proposal to sell the company widgets at a price of $60500 for 100,000 units. Bramble is currently making these components in its own factory. The following costs are associated with this part of the process when 100,000 units are produced: Direct material $22700 Direct labour 23000 Manufacturing overhead 29000 Total $74700
Q: Gelb Company currently manufactures 40,000 units per year of a key component for its manufacturing…
A: Given information is: Gelb Company currently manufactures 40,000 units per year of a key component…
Q: Hattie Company has been purchasing 40,000 units of component, Part A25 for $38.40 per unit. Hattie…
A: Under differential analysis, the relevant cost of buying the component should be compared with…
Q: Mohave Corp. is considering outsourcing production of the umbrella tote bag included with some of…
A: Solution:- 1)Computation of the difference in cost between making and buying the umbrella tote bag…
Q: A company produces 300 microwave ovens per montn, each of WNich inciudes one electrical circuit. The…
A: in the given question company assume that the company could not reduce any fixed costs by…
Q: Tris Technology Company produces a fibre cloth that could easily wipe away any dirt and water. The…
A: Special orders have separate terms and conditions then regular orders and a company has to…
Q: Part P40 is a part used in the production of air conditioners at Jackson Corporation. The following…
A: Net operating income = Desired operating income - fixed costs = 98000-41000*50% = $77,500
Q: Cardinal Company needs 20,000 units of a certain part to use in its production cycle. The following…
A: When a business has to choose between two alternatives one is purchasing from outside and other is…
Q: Waterway Company manufactures widgets. Carla Vista Company has approached Waterway with a proposal…
A: We should not consider unavoidable manufacturing overhead. Because they are fixed cost and not…
Q: Manama Inc. is now producing TVs. The company’s accounting department reports the following costs of…
A: Make or buy decision- The technique of marginal costing helps the management decide whether to…
Q: Travers Company is contemplating the acceptance of a special order has the following unit cost…
A: The answer is as fallows
Q: Futura Company purchases the 61,000 starters that it installs in its standard line of farm tractors…
A: If the cost of buying is more than the cost of making, then there will be financial advantage. If…
Q: Andreasen Corporation manufactures thermostats for office buildings. The following is the cost of…
A: Lets understand the basics. When management have special order available then management try to…
Q: Quirch Inc. manufactures machine parts for aircraft engines. The CEO, Chucky Valters, was…
A: Relevant costs are those costs which are relevant to be considered for making a particular decision.…
Q: Rubium Micro Devices currently manufactures a subassembly for its main product. The costs per unit…
A: Relevant cost of Making = (Direct material + labor cost + variable overhead) x no. of units +…
Q: ABC Company manufactures Part AA for use in its production cycle. The costs per unit for 25,000…
A: Relevant cost to Make Amount (in P) Direct materials (25,000 units X P 7.50 per unit)…
Q: ABC Manufacturing Corp. is using 10,000 units of part no. 300 as a component to assemble one of its…
A: Make or Buy decisions are referred to as taking decision regarding either to produce the product…
Q: Pumpkin Company needs 20,000 units of a certain part to use in one of its products. The following…
A: Variable cost means the cost which vary with the level of output and fixed cost means the cost which…
Q: Plummer Company makes 4,000 units per year of a part called an axial tap for use in one of its…
A: Formulas:
Q: Travers Company is contemplating the acceptance of a special order has the following unit cost…
A: In a decision to accept or reject an order, the fixed costs are ignored or not considered as they…
Q: nteliSystems manufactures an optical switch that it uses in its final product. InteliSystems…
A: Formula; Variable costs=Direct material+Direct labor+Varible overhead
Q: he Haven Machine Company makes 40,000 screws to be used in the production of its washing machines.…
A: In this question, we have to compute that the company should buy or make the product.
Q: Quiche & Tell, Inc., is considering outsourcing one of its many products rather than making it…
A: Working: Purchase Cost per quiche = Total purchase costs / No. of quiches purchase = $15,000 /…
Q: Futura Company purchases the 65,000 starters that it installs in its standard line of farm tractors…
A: Purchase cost = 65000 units * $ 12.9 = $ 838500
Q: Company X was recently approached by a supplier that would like to sell Company X a part. Company X…
A: Business entities either produce the goods themselves or purchase the goods from outside suppliers.…
Q: Swifty Corporation can produce 100 units of a necessary component part with the following costs:…
A: Introduction: Materials and supplies devoured during the manufacture of products that are typically…
Q: Lewis Auto Company manufactures a part for use in its production of automobiles. When 1,000 items…
A: Whenever business has alternatives of either make the product or buy the product, then total costs…
Q: The SP Corporation makes 48,000 motors to be used in the production of its sewing machines. The…
A: Determine the purchase cost: Units purchased 48,000 Purchase price $ 27.55 Total purchase…
Q: Howell Corporation produces an executive jet for which it currently manufactures a fuel valve; the…
A: Particulars Amount Amount Outsourcing Cost ($2,000 * 1,000) $2,000,000 Less: Cost Savings…
Q: ........................................................................................... 80…
A: No, La Salle, Inc. should not accept the offer of outside supplier since it they will have to incur…
Q: Dixon Company manufactures part 347 for use in one of its main products. Normal annual production…
A: Fixed costs per 100 units = $160 Total units = 100,000 units Total fixed costs = $160 x 100,000 /…
Q: Your Company uses a total of 15,000 units of a part that are produced and used every year. The…
A: Make cost is the cost of producing the product internally. Buy cost is the cost to purchase the…
Q: Edidas Company needs 20,000 units of Part GX to use in producing one of its products. If Edidas buys…
A: Relevant Costs are the equal to the marginal cost of production, i.e. the additional expenditure…
Q: InteliSystems manufactures an optical switch that it uses in its final product. InteliSystems…
A: cost per unit = Direct material sper unit = $560000 / 70000 = $8per unit Direct labour per unit =…
Q: Riders, Ltd. is a manufacturer that produces motorized scooters. Currently, it is producing the…
A: Avoidable Cost is relevant cost in decision making process. and unavoidable cost is not relevant in…
Q: which option is advantageous and by how much
A: Purchase price per unit P320 Fixed manufacturing overhead per unit P130 Total cost of buying the…
Q: Sandusky Inc. has the following costs when producing 100,000 units: Variable costs $600,000 Fixed…
A: The cost can be classified into two categories i.e fixed cost and variable cost. The FIxed cost…
Q: Harmony is currently producing 100 units of a necessary component part by incurring P60,000 in…
A: Saving realize in buying instead of making the component = Relevant production costs - Buying costs…
Q: Zeus Company, a manufacturer of snowmobiles, is operating at 70% of plant capacity. Its plant…
A: Manufacturing cost consist of direct materials, direct labor and manufacturing variable overheads.
Q: he James Company manufactures widgets that sell for $120 each. The company's unit cost for each…
A: Solution: Relevant cost of making = Direct materials + direct labor + variable overhead = 30+40 +…
Q: Wings Incorporated manufactures machine parts for aircraft engines. The CEO, Chucky Valters, was…
A: Make or Buy Decision: The process of deciding whether to produce a product or service in-house or to…
Q: Hildesheim Company has 2,000 obsolete light fixtures that are carried in inventory at a…
A: Introduction: Opportunity cost: In simple terms , Cost for opportunity lost called as opportunity…
Q: Selma Corporation uses Part PB7 in one of its products. The company's Accounting Department reports…
A: Introduction: The Make or buy choice is the demonstration of settling on a vital decision between…
Q: Steve company produces 30000 units of parts each year for use on its production line. The cost per…
A: Relevant cost of S6 per unit = Direct material cost + direct labor cost + variable manufacturing…
Q: Mohave Corp. is considering outsourcing production of the umbrella tote bag included with some of…
A: The differential analysis is performed when two alternatives are available with the organisation.
Q: The Serpent Corporation makes 47,000 motors to be used in the production of its sewing machines. The…
A: Given that, Serpent Corporation makes 47,000 motors to be used in the production of its sewing…
Q: Your Company makes 35,000 motors to be used in the production of its sewing machines. The cost per…
A: Direct materials: It is the basic input required to manufacture the finished products. The raw…
Q: Mitus Company needs 20,000 special buckles for a backpack that it designs and manufactures. If the…
A: When there are two alternatives of either making or purchasing the product from outside, then total…
Q: Mighty Safe Fire Alarm is currently buying 57,000 motherboards from MotherBoard, Inc. at a price of…
A: Comparing the cost in both cases i.e buy and make and whose cost is less and increase the profit…
| Direct material | $22700 |
| Direct labour | 23000 |
| Manufacturing overhead | 29000 |
| Total | $74700 |
The manufacturing overhead consists of $12300 of costs that will be eliminated if the components are no longer produced by Bramble. From Bramble’s point of view, how much is the incremental cost or savings if the widgets are bought instead of made?
Step by step
Solved in 2 steps
- Carltons Kitchens makes two types of pasta makers: Strands and Shapes. The company expects to manufacture 70,000 units of Strands, which has a per-unit direct material cost of $10 and a per-unit direct labor cost of $60. It also expects to manufacture 30.000 units of Shapes, which has a per-unit material cost of $15 and a per-unit direct labor cost of $40. It is estimated that Strands will use 140,000 machine hours and Shapes will require 60,000 machine hours. Historically, the company has used the traditional allocation method and applied overhead at a rate of $21 per machine hour. It was determined that there were three cost pools, and the overhead for each cost pool is shown: The cost driver for each cost pool and its expected activity is shown: A. What is the per-unit cost for each product under the traditional allocation method? B. What is the per-unit cost for each product under ABC costing?Remarkable Enterprises requires four units of part A for every unit of Al that it produces. Currently, part A is made by Remarkable, with these per-unit costs in a month when 4,000 units were produced: Variable manufacturing overhead is applied at $1.60 per unit. The other $0.50 of overhead consists of allocated fixed costs. Remarkable will need 8,000 units of part A for the next years production. Altoona Corporation has offered to supply 8,000 units of part A at a price of $8.00 per unit. If Remarkable accepts the offer, all of the variable costs and $2,000 of the fixed costs will be avoided. Should Remarkable accept the offer from Altoona Corporation?Rolertyme Company manufactures roller skates. With the exception of the rollers, all parts of the skates are produced internally. Neeta Booth, president of Rolertyme, has decided to make the rollers instead of buying them from external suppliers. The company needs 100,000 sets per year (currently it pays 1.90 per set of rollers). The rollers can be produced using an available area within the plant. However, equipment for production of the rollers would need to be leased (30,000 per year lease payment). Additionally, it would cost 0.50 per machine hour for power, oil, and other operating expenses. The equipment will provide 60,000 machine hours per year. Direct material costs will average 0.75 per set, and direct labor will average 0.25 per set. Since only one type of roller would be produced, no additional demands would be made on the setup activity. Other overhead activities (besides machining and setups), however, would be affected. The companys cost management system provides the following information about the current status of the overhead activities that would be affected. (The supply and demand figures do not include the effect of roller production on these activities.) The lumpy quantity indicates how much capacity must be purchased should any expansion of activity supply be needed. The purchase price is the cost of acquiring the capacity represented by the lumpy quantity. This price also represents the cost of current spending on existing activity supply (for each block of activity). Production of rollers would place the following demands on the overhead activities: Producing the rollers also means that the purchase of outside rollers will cease. Thus, purchase orders associated with the outside acquisition of rollers will drop by 5,000. Similarly, the moves for the handling of incoming orders will decrease by 200. The company has not inspected the rollers purchased from outside suppliers. Required: 1. Classify all resources associated with the production of rollers as flexible resources and committed resources. Label each committed resource as a short- or long-term commitment. How should we describe the cost behavior of these short- and long-term resource commitments? Explain. 2. Calculate the total annual resource spending (for all activities except for setups) that the company will incur after production of the rollers begins. Break this cost into fixed and variable activity costs. In calculating these figures, assume that the company will spend no more than necessary. What is the effect on resource spending caused by production of the rollers? 3. Refer to Requirement 2. For each activity, break down the cost of activity supplied into the cost of activity output and the cost of unused activity.
- Brees, Inc., a manufacturer of golf carts, has just received an offer from a supplier to provide 2,600 units of a component used in its main product. The component is a track assembly that is currently produced internally. The supplier has offered to sell the track assembly for 66 per unit. Brees is currently using a traditional, unit-based costing system that assigns overhead to jobs on the basis of direct labor hours. The estimated traditional full cost of producing the track assembly is as follows: Prior to making a decision, the companys CEO commissioned a special study to see whether there would be any decrease in the fixed overhead costs. The results of the study revealed the following: 3 setups1,160 each (The setups would be avoided, and total spending could be reduced by 1,160 per setup.) One half-time inspector is needed. The company already uses part-time inspectors hired through a temporary employment agency. The yearly cost of the part-time inspectors for the track assembly operation is 12,300 and could be totally avoided if the part were purchased. Engineering work: 470 hours, 45/hour. (Although the work decreases by 470 hours, the engineer assigned to the track assembly line also spends time on other products, and there would be no reduction in his salary.) 75 fewer material moves at 30 per move. Required: 1. Ignore the special study, and determine whether the track assembly should be produced internally or purchased from the supplier. 2. Now, using the special study data, repeat the analysis. 3. Discuss the qualitative factors that would affect the decision, including strategic implications. 4. After reviewing the special study, the controller made the following remark: This study ignores the additional activity demands that purchasing would cause. For example, although the demand for inspecting the part on the production floor decreases, we may need to inspect the incoming parts in the receiving area. Will we actually save any inspection costs? Is the controller right?Otero Fibers, Inc., specializes in the manufacture of synthetic fibers that the company uses in many products such as blankets, coats, and uniforms for police and firefighters. Otero has been in business since 1985 and has been profitable every year since 1993. The company uses a standard cost system and applies overhead on the basis of direct labor hours. Otero has recently received a request to bid on the manufacture of 800,000 blankets scheduled for delivery to several military bases. The bid must be stated at full cost per unit plus a return on full cost of no more than 10 percent after income taxes. Full cost has been defined as including all variable costs of manufacturing the product, a reasonable amount of fixed overhead, and reasonable incremental administrative costs associated with the manufacture and sale of the product. The contractor has indicated that bids in excess of 30 per blanket are not likely to be considered. In order to prepare the bid for the 800,000 blankets, Andrea Lightner, cost accountant, has gathered the following information about the costs associated with the production of the blankets. Direct machine costs consist of items such as special lubricants, replacement of needles used in stitching, and maintenance costs. These costs are not included in the normal overhead rates. Otero recently developed a new blanket fiber at a cost of 750,000. In an effort to recover this cost, Otero has instituted a policy of adding a 0.50 fee to the cost of each blanket using the new fiber. To date, the company has recovered 125,000. Lightner knows that this fee does not fit within the definition of full cost, as it is not a cost of manufacturing the product. Required: 1. Calculate the minimum price per blanket that Otero Fibers could bid without reducing the companys operating income. 2. Using the full-cost criteria and the maximum allowable return specified, calculate Otero Fibers bid price per blanket. 3. Without prejudice to your answer to Requirement 2, assume that the price per blanket that Otero Fibers calculated using the cost-plus criteria specified is greater than the maximum bid of 30 per blanket allowed. Discuss the factors that Otero Fibers should consider before deciding whether or not to submit a bid at the maximum acceptable price of 30 per blanket. (CMA adapted)Jonfran Company manufactures three different models of paper shredders including the waste container, which serves as the base. While the shredder heads are different for all three models, the waste container is the same. The number of waste containers that Jonfran will need during the following years is estimated as follows: The equipment used to manufacture the waste container must be replaced because it is broken and cannot be repaired. The new equipment would have a purchase price of 945,000 with terms of 2/10, n/30; the companys policy is to take all purchase discounts. The freight on the equipment would be 11,000, and installation costs would total 22,900. The equipment would be purchased in December 20x4 and placed into service on January 1, 20x5. It would have a five-year economic life and would be treated as three-year property under MACRS. This equipment is expected to have a salvage value of 12,000 at the end of its economic life in 20x9. The new equipment would be more efficient than the old equipment, resulting in a 25 percent reduction in both direct materials and variable overhead. The savings in direct materials would result in an additional one-time decrease in working capital requirements of 2,500, resulting from a reduction in direct material inventories. This working capital reduction would be recognized at the time of equipment acquisition. The old equipment is fully depreciated and is not included in the fixed overhead. The old equipment from the plant can be sold for a salvage amount of 1,500. Rather than replace the equipment, one of Jonfrans production managers has suggested that the waste containers be purchased. One supplier has quoted a price of 27 per container. This price is 8 less than Jonfrans current manufacturing cost, which is as follows: Jonfran uses a plantwide fixed overhead rate in its operations. If the waste containers are purchased outside, the salary and benefits of one supervisor, included in fixed overhead at 45,000, would be eliminated. There would be no other changes in the other cash and noncash items included in fixed overhead except depreciation on the new equipment. Jonfran is subject to a 40 percent tax rate. Management assumes that all cash flows occur at the end of the year and uses a 12 percent after-tax discount rate. Required: 1. Prepare a schedule of cash flows for the make alternative. Calculate the NPV of the make alternative. 2. Prepare a schedule of cash flows for the buy alternative. Calculate the NPV of the buy alternative. 3. Which should Jonfran domake or buy the containers? What qualitative factors should be considered? (CMA adapted)
- Gent Designs requires three units of part A for every unit of Al that it produces. Currently, part A is made by Gent, with these per-unit costs in a month when 4.000 units were produced: Variable manufacturing overhead is applied at $1.00 per unit. The other $0.30 of overhead consists of allocated fixed costs. Gent will need 6,000 units of part A for the next years production. Cory Corporation has offered to supply 6,000 units of part A at a price of $7.00 per unit. It Gent accepts the offer, all of the variable costs and $1,200 of the fixed costs will be avoided. Should Gent Designs accept the offer from Cory Corporation?Andalus Furniture Company has two manufacturing plants, one at Aynor and another at Spartanburg. The cost in dollars of producing a kitchen chair at each of the two plants is given here. The cost of producing Q1 chairs at Aynor is: 75Q1+5Q12+100 and the cost of producing Q2 kitchen chairs at Spartanburg is: 25Q2+2.5Q22+150. Andalus needs to manufacture a total of 40 kitchen chairs to meet an order just received. How many chairs should be made at Aynor, and how many should be made at Spartanburg in order to minimize total production cost?Tucariz Company processes Duo into two joint products, Big and Mini. Duo is purchased in 1,000-gallon drums for 2.000. Processing costs are 3,000 to process the 1,000 gallons of Duointo 800 gallons of Big and 200 gallons of Mini. The selling price is 9 per gallon for Big and4 per gallon for Mini. If the physical units method is used to allocate joint costs to the finalproducts, the total cost allocated to produce Mini is: a. 500. b. 4,000. c. 1,000. d. 4,500.
- Roper Furniture manufactures office furniture and tracks cost data across their process. The following are some of the costs that they incur. Classify these costs as fixed or variable costs, and as product costs or period costs. Wood used to produce desks ($125,00 per desk) Production labor used to produce desks ($15 per hour) Production supervisor salary ($45,000 per year) Depreciation on factory equipment ($60,000 per year) Selling and administrative expenses ($45,000 per year) Rent on corporate office ($44,000 per year) Nails, glue, and other materials required to produce desks (varies per desk) Utilities expenses for production facility Sales staff commission (5% of gross sales)Box Springs, Inc., makes two sizes of box springs: twin and double. The direct material for the twin is $25 per unit and $40 s used in direct labor, while the direct material for the double is $40 per unit, and the labor cost is $50 per unit. Box Springs estimates it will make 5,000 twins and 9,000 doubles in the next year. It estimates the overhead for each cost pool and cost driver activities as follows: How much does each unit cost to manufacture?Oat Treats manufactures various types of cereal bars featuring oats. Simmons Cereal Company has approached Oat Treats with a proposal to sell the company its top selling oat cereal bar at a price of $27,500 for 20,000 bars. The costs shown are associated with production of 20,000 oat bars currently. The manufacturing overhead consists of $3,000 of variable costs with the balance being allocated to fixed costs. Should Oat Treats make or buy the oat bars?
