Chenango Industries uses 10 units of part JR63 each month in the production of radar equipment. The cost of manufacturing one unitof JR63 is the following:Direct material$ 3,000Material handling (20% of direct-material cost)600Direct labor37,000Manufacturing overhead (150% of direct labor)55,500Total manufacturing cost$ 96,100Material handling represents the direct variable costs of the Receiving Department that are applied to direct materials and purchasedcomponents on the basis of their cost. This is a separate charge in addition to manufacturing overhead. Chenango Industries' annualmanufacturing overhead budget is one-third variable and two-thirds fixed. Scott Supply, one of Chenango Industries' reliable vendors,has offered to supply part number JR63 at a unit price of $62,000.Required:1. If Chenango Industries purchases the JR63 units from Scott, the capacity Chenango Industries used to manufacture these partswould be idle. Should Chenango Industries decide to purchase the parts from Scott, the unit cost of JR63 would increase (or decrease)by what amount?2. Assume Chenango Industries is able to rent out all its idle capacity for $92,000 per month. If Chenango Industries decides topurchase the 10 units from Scott Supply, Chenango's monthly cost for JR63 would increase (or decrease) by what amount?3. Assume that Chenango Industries does not wish to commit to a rental agreement but could use its idle capacity to manufactureanother product that would contribute $176,000 per month. If Chenango's management elects to manufacture JR63 in order tomaintain quality control, what is the net amount of Chenango's cost from using the space to manufacture part JR63?

Name: Chenango Industries uses 10 units of part JR63 each month in the prod
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Description: Chenango Industries uses 10 units of part JR63 each month in the production of radar equipment. The cost of manufacturing one unitof JR63 is the following:Direct material$ 3,000Material handling (20% of direct-material cost)600Direct labor37,000Manu

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chenango Industries uses 10 units of part JR63 each month in the production of radar equipment. The cost of manufacturing one unit -f JR63 is the following: Direct material $ 3,000 Material handling (20% of direct-material cost) Direct labor 600 37,000 55,500 $ 96,100 Manufacturing overhead (150% of direct labor) Total manufacturing cost Material handling represents the direct variable costs of the Receiving Department that are applied to direct materials and purchased omponents on the basis of their cost. This is a separate charge in addition to manufacturing overhead. Chenango Industries' annual hanufacturing overhead budget is one-third variable and two-thirds fixed. Scott Supply, one of Chenango Industries' reliable vendors, as offered to supply part number JR63 at a unit price of $62,000. Cequired:

chenango Industries uses 10 units of part JR63 each month in the production of radar equipment. The cost of manufacturing one unit -f JR63 is the following: Direct material $ 3,000 Material handling (20% of direct-material cost) Direct labor 600 37,000 55,500 $ 96,100 Manufacturing overhead (150% of direct labor) Total manufacturing cost Material handling represents the direct variable costs of the Receiving Department that are applied to direct materials and purchased omponents on the basis of their cost. This is a separate charge in addition to manufacturing overhead. Chenango Industries' annual hanufacturing overhead budget is one-third variable and two-thirds fixed. Scott Supply, one of Chenango Industries' reliable vendors, as offered to supply part number JR63 at a unit price of $62,000. Cequired:

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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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?
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