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Coram Audio makes wireless headphones. Each pair of headphones comes with a travel case. Since its founding, Coram has manufactured its own travel cases. Recently, Holmur Travel Gear (HTG), a local outfitter that manufactures and sells backpacks, tent cases, and so on, contacted Coram and proposed that they produce the headphone travel cases. Based on management experience, Coram's cost per travel case is as follows (based on annual production of 43,200 units). Direct materials Direct labor Variable overhead Fixed overhead Total $ 10.00 21.20 6.40 4.70 $ 42.30 HTG has offered to sell the case to Coram for $39 each. The total order would amount to 43,200 travel cases per year. Coram's management decides that they will make the switch to HTG cases if Coram can save at least $13,600 per year. Accepting the offer would eliminate annual fixed overhead of $82,080. Required: a. Prepare a schedule that shows the total differential costs. b. Should Coram continue to make the travel cases or buy them from HTG? Complete this question by entering your answers in the tabs below. Required A Required B Prepare a schedule that shows the total differential costs. (Select option "higher" or "lower", keeping Status Quo as the base. Select "none" if there is no effect.) Status Quo HTG's offer Materials Labor Variable overhead Fixed overhead applied Total costs Alternative < Required A Difference Required B >

Coram Audio makes wireless headphones. Each pair of headphones comes with a travel case. Since its founding, Coram has manufactured its own travel cases. Recently, Holmur Travel Gear (HTG), a local outfitter that manufactures and sells backpacks, tent cases, and so on, contacted Coram and proposed that they produce the headphone travel cases. Based on management experience, Coram's cost per travel case is as follows (based on annual production of 43,200 units). Direct materials Direct labor Variable overhead Fixed overhead Total $ 10.00 21.20 6.40 4.70 $ 42.30 HTG has offered to sell the case to Coram for $39 each. The total order would amount to 43,200 travel cases per year. Coram's management decides that they will make the switch to HTG cases if Coram can save at least $13,600 per year. Accepting the offer would eliminate annual fixed overhead of $82,080. Required: a. Prepare a schedule that shows the total differential costs. b. Should Coram continue to make the travel cases or buy them from HTG? Complete this question by entering your answers in the tabs below. Required A Required B Prepare a schedule that shows the total differential costs. (Select option "higher" or "lower", keeping Status Quo as the base. Select "none" if there is no effect.) Status Quo HTG's offer Materials Labor Variable overhead Fixed overhead applied Total costs Alternative < Required A Difference Required B >

Cornerstones of Cost Management (Cornerstones Series)
Cornerstones of Cost Management (Cornerstones Series)
4th Edition
ISBN:9781305970663
Author:Don R. Hansen, Maryanne M. Mowen
Publisher:Don R. Hansen, Maryanne M. Mowen
Chapter16: Cost-volume-profit Analysis
Section: Chapter Questions
Problem 41P: Salem Electronics currently produces two products: a programmable calculator and a tape recorder. A...
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Coram Audio makes wireless headphones. Each pair of headphones comes with a travel case. Since its founding, Coram has manufactured its own travel cases. Recently, Holmur Travel Gear (HTG), a local outfitter that manufactures and sells backpacks, tent cases, and so on, contacted Coram and proposed that they produce the headphone travel cases. Based on management experience, Coram's cost per travel case is as follows (based on annual production of 43,200 units). Direct materials Direct labor Variable overhead Fixed overhead Total HTG has offered to sell the case to Coram for $39 each. The total order would amount to 43,200 travel cases per year. Coram's management decides that they will make the switch to HTG cases if Coram can save at least $13,600 per year. Accepting the offer would eliminate annual fixed overhead of $82,080. $ 10.00 21.20 6.40 4.70 $ 42.30 Required: a. Prepare a schedule that shows the total differential costs. b. Should Coram continue to make the travel cases or buy them from HTG? Complete this question by entering your answers in the tabs below. Required A Required B Prepare a schedule that shows the total differential costs. (Select option "higher" or "lower", keeping Status Quo as the base. Select "none" if there is no effect.) Status Quo Alternative HTG's offer Materials Labor Variable overhead Fixed overhead applied Total costs Required A Difference Required B
Transcribed Image Text:Coram Audio makes wireless headphones. Each pair of headphones comes with a travel case. Since its founding, Coram has manufactured its own travel cases. Recently, Holmur Travel Gear (HTG), a local outfitter that manufactures and sells backpacks, tent cases, and so on, contacted Coram and proposed that they produce the headphone travel cases. Based on management experience, Coram's cost per travel case is as follows (based on annual production of 43,200 units). Direct materials Direct labor Variable overhead Fixed overhead Total HTG has offered to sell the case to Coram for $39 each. The total order would amount to 43,200 travel cases per year. Coram's management decides that they will make the switch to HTG cases if Coram can save at least $13,600 per year. Accepting the offer would eliminate annual fixed overhead of $82,080. $ 10.00 21.20 6.40 4.70 $ 42.30 Required: a. Prepare a schedule that shows the total differential costs. b. Should Coram continue to make the travel cases or buy them from HTG? Complete this question by entering your answers in the tabs below. Required A Required B Prepare a schedule that shows the total differential costs. (Select option "higher" or "lower", keeping Status Quo as the base. Select "none" if there is no effect.) Status Quo Alternative HTG's offer Materials Labor Variable overhead Fixed overhead applied Total costs Required A Difference Required B
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