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Cha Inc uses 10 units of part A23 each month in the production of radar equipment. The cost of manufacturing one unit of A23 is the following: Direct material P1,000 Material handling (20% of DMC) Direct labor 200 8,000 мон 12,000 P21,200 TMC Material handling represents the direct variable costs of the Receiving Dept. that are applied to direct materials and purchased component on the basis of their cost. This is a separate charge in addition to manufacturing overhead. Cha's annual manufacturing overhead is one-third variable and two-third fixed. Gale Supply, one Cha's reliable vendors, has offered to supply part number A23 at a unit price of P15,000. 1. If Cha purchases the A23 units from Gale the capacity of Cha used to manufacture these parts would be idle. Should Cha decide to purchase the parts from Gale, the unit cost of A23 increase or decrease by what amount?| 2. Assume Cha is able to rent out all the idle capacity for P25,000 per month. If Cha decides to purchase the 10 units from Gale. Cha's monthly cost for A23 would increase or decrease by what amount? 3. Assume Cha does not wish to commit rental agreement but could use its idle capacity to manufacture another product that would contribute P52,000 per month. If Cha elects to manufacture A23 in order to maintain quality control, what is the net amount of Cha's cost from using the space to manufacture part A23?

Cha Inc uses 10 units of part A23 each month in the production of radar equipment. The cost of manufacturing one unit of A23 is the following: Direct material P1,000 Material handling (20% of DMC) Direct labor 200 8,000 мон 12,000 P21,200 TMC Material handling represents the direct variable costs of the Receiving Dept. that are applied to direct materials and purchased component on the basis of their cost. This is a separate charge in addition to manufacturing overhead. Cha's annual manufacturing overhead is one-third variable and two-third fixed. Gale Supply, one Cha's reliable vendors, has offered to supply part number A23 at a unit price of P15,000. 1. If Cha purchases the A23 units from Gale the capacity of Cha used to manufacture these parts would be idle. Should Cha decide to purchase the parts from Gale, the unit cost of A23 increase or decrease by what amount?| 2. Assume Cha is able to rent out all the idle capacity for P25,000 per month. If Cha decides to purchase the 10 units from Gale. Cha's monthly cost for A23 would increase or decrease by what amount? 3. Assume Cha does not wish to commit rental agreement but could use its idle capacity to manufacture another product that would contribute P52,000 per month. If Cha elects to manufacture A23 in order to maintain quality control, what is the net amount of Cha's cost from using the space to manufacture part A23?

Principles of Accounting Volume 2
Principles of Accounting Volume 2
19th Edition
ISBN:9781947172609
Author:OpenStax
Publisher:OpenStax
Chapter10: Short-term Decision Making
Section: Chapter Questions
Problem 6PA: Gent Designs requires three units of part A for every unit of Al that it produces. Currently, part A...
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Cha Inc uses 10 units of part A23 each month in the production of radar equipment. The cost of manufacturing one unit of A23 is the following: Direct material Material handling (20% of DMC) P1,000 200 Direct labor 8,000 12,000 P21,200 МОН TMC Material handling represents the direct variable costs of the Receiving Dept. that are applied to direct materials and purchased component on the basis of their cost. This is a separate charge in addition to manufacturing overhead. Cha's annual manufacturing overhead is one-third variable and two-third fixed. Gale Supply, one Cha's reliable vendors, has offered to supply part number A23 at a unit price of P15,000. 1. If Cha purchases the A23 units from Gale the capacity of Cha used to manufacture these parts would be idle. Should Cha decide to purchase the parts from Gale, the unit cost of A23 increase or decrease by what amount?| 2. Assume Cha is able to rent out all the idle capacity for P25,000 per month. If Cha decides to purchase the 10 units from Gale. Cha's monthly cost for A23 would increase or decrease by what amount? 3. Assume Cha does not wish to commit rental agreement but could use its idle capacity to manufacture another product that would contribute P52,000 per month. If Cha elects to manufacture A23 in order to maintain quality control, what is the net amount of Cha's cost from using the space to manufacture part A23?
Transcribed Image Text:Cha Inc uses 10 units of part A23 each month in the production of radar equipment. The cost of manufacturing one unit of A23 is the following: Direct material Material handling (20% of DMC) P1,000 200 Direct labor 8,000 12,000 P21,200 МОН TMC Material handling represents the direct variable costs of the Receiving Dept. that are applied to direct materials and purchased component on the basis of their cost. This is a separate charge in addition to manufacturing overhead. Cha's annual manufacturing overhead is one-third variable and two-third fixed. Gale Supply, one Cha's reliable vendors, has offered to supply part number A23 at a unit price of P15,000. 1. If Cha purchases the A23 units from Gale the capacity of Cha used to manufacture these parts would be idle. Should Cha decide to purchase the parts from Gale, the unit cost of A23 increase or decrease by what amount?| 2. Assume Cha is able to rent out all the idle capacity for P25,000 per month. If Cha decides to purchase the 10 units from Gale. Cha's monthly cost for A23 would increase or decrease by what amount? 3. Assume Cha does not wish to commit rental agreement but could use its idle capacity to manufacture another product that would contribute P52,000 per month. If Cha elects to manufacture A23 in order to maintain quality control, what is the net amount of Cha's cost from using the space to manufacture part A23?
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