Problem 3 Omantex Co. produces 5,000 units of its new product. The following costs were incurred for that level of production: Direct materials RO 55,000 Direct labor 160,000 Variable overhead 75,000 Fixed overhead 175,000 If Omantex buys the part from Fanja Co. who offers a unit price of RO 68, should the company make or buy the product?

Problem 3 Omantex Co. produces 5,000 units of its new product. The following costs were incurred for that level of production: Direct materials RO 55,000 Direct labor 160,000 Variable overhead 75,000 Fixed overhead 175,000 If Omantex buys the part from Fanja Co. who offers a unit price of RO 68, should the company make or buy the product?

Principles of Accounting Volume 2

19th Edition

ISBN:9781947172609

Author:OpenStax

Publisher:OpenStax

Chapter5: Process Costing

Section: Chapter Questions

Problem 8MC: What is the conversion cost to manufacture insulated travel cups if the costs are: direct materials,...

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What is the conversion cost to manufacture insulated travel cups if the costs are: direct materials, $17,000; direct labor, $33,000; and manufacturing overhead, $70,000? A. $16,000 B. $50,000 C. $103,000 D. $120000
Production run size and activity improvement Littlejohn, Inc. manufactures machined parts for the automotive industry. The activity cost associated with Part XX-10 is as follows: Activity Activity-Base Usage Activity Rate = Activity Cost Fabrication 250 dlh 80per dlh 20,000 Setup 10 setups 80 per setup 800 Production control 10 prod, runs 30 per prod, run 300 Moving 10 moves 25 per move 250 Total activity cost per unit 21,350 Estimated units of production 500 Activity cost per unit 42.70 Each unit requires 30 minutes of fabrication direct labor. Moreover, part XX-10 is manufactured in production run sizes of 50 units. Each production run is set up, scheduled (production control), and moved as a batch of 50 units. Management is considering improvements in the setup, production control, and moving activities in order to cut the production run sizes by half. As a result, the number of setups, production runs, and mows will double from 10 to 20. Such improvements are expected to speed the companys ability to respond to customer orders. Setup is reengineered so that it takes 60% of the original cost per setup. Production control software will allow production control effort and cost per production run to decline by 60%. Moving distance was reduced by 40%, thus reducing the cost per mow by the same amount. A. Determine the revised activity cost per unit under the proposed changes. B. Did these improvements reduce the activity cost per unit? C. What cost per unit for setup would be required for the solution in (A) to equal the base solution?
Crafts 4 All has these costs associated with production of 12,000 units of accessory products: direct materials, $19; direct labor, $30; variable manufacturing overhead, $15; total fixed manufacturing overhead, $450,000. What is the cost per unit under both the variable and absorption methods?
Bountiful Manufacturing produces two types of bike frames (Frame X and Frame Y). Frame X passes through four processes: cutting, welding, polishing, and painting. Frame Y uses three of the same processes: cutting, welding, and painting. Each of the four processes employs 10 workers who work eight hours each day. Frame X sells for 40 per unit, and Frame Y sells for 55 per unit. Materials is the only unit-level variable expense. The materials cost for Frame X is 20 per unit, and the materials cost for Frame Y is 25 per unit. Bountifuls accounting system has provided the following additional information about its operations and products: Bountifuls management has determined that any production interruptions can be corrected within two days. Required: 1. Assuming that Bountiful can meet daily market demand, compute the potential daily profit. Now, compute the minutes needed for each process to meet the daily market demand. Can Bountiful meet daily market demand? If not, where is the bottleneck? Can you derive an optimal mix without using a graphical solution? If so, explain how. 2. Identify the objective function and the constraints. Then, graph the constraints facing Bountiful. Determine the optimal mix and the maximum daily contribution margin (throughput). 3. Explain how a drum-buffer-rope system would work for Bountiful. 4. Suppose that the Engineering Department has proposed a process design change that will increase the polishing time for Frame X from 15 to 23 minutes per unit and decrease the welding time from 15 minutes to 10 minutes per unit (for Frame X). The cost of process redesign would be 10,000. Evaluate this proposed change. What step in the TOC process does this proposal represent?
Preparation of Income Statement: Manufacturing Firm Laworld Inc. manufactures small camping tents. Last year, 200,000 tents were made and sold for 60 each. Each tent includes the following costs: The only selling expenses were a commission of 2 per unit sold and advertising totaling 100,000. Administrative expenses, all fixed, equaled 300,000. There were no beginning or ending finished goods inventories. There were no beginning or ending work-in-process inventories. Required: 1. Calculate the product cost for one tent. Calculate the total product cost for last year. 2. CONCEPTUAL CONNECTION Prepare an income statement for external users. Did you need to prepare a supporting statement of cost of goods manufactured? Explain. 3. CONCEPTUAL CONNECTION Suppose 200,000 tents were produced (and 200,000 sold) but that the company had a beginning finished goods inventory of 10,000 tents produced in the prior year at 40 per unit. The company follows a first-in, first-out policy for its inventory (meaning that the units produced first are sold first for purposes of cost flow). What effect does this have on the income statement? Show the new statement.
(Appendix 11A) Cycle Time, Velocity, Conversion Cost The theoretical cycle time for a product is 30 minutes per unit. The budgeted conversion costs for the manufacturing cell are 2,700,000 per year. The total labor minutes available are 600,000. During the year, the cell was able to produce 1.5 units of the product per hour. Suppose also that production incentives exist to minimize unit product costs. Required: 1. Compute the theoretical conversion cost per unit. 2. Compute the applied conversion cost per unit (the amount of conversion cost actually assigned to the product). 3. CONCEPTUAL CONNECTION Discuss how this approach to assigning conversion costs can improve delivery time performance.
A company produces two products. E and F in batches of 100 units. The production and cost data are: The company can only perform 12,000 set-ups each period yet there is unlimited demand for each product. What is the differential profit from producing product E instead of product F for the year? A. $216,000 B. $204,000 C. $12,000 D. $54,000
What is the cost of direct labor f the conversion costs are $330.000 and manufacturing overhead is $275,000? $55,000 $275,000 $330,000 $605,000
QUESTION 3 Senior Company currently buys 30,000 units of a part used to manufacture its product at $40 per unit. Recently the supplier informed Senior Company that a 20% increase will take effect next year. Senior has some additional space and could produce the units for the following per-unit costs (based on 30,000 units): Direct materials $16 Direct labour 12 Variable overhead 12 Fixed overhead 10 Total $50 If the units are purchased from the supplier, $200,000 of fixed costs will continue to be incurred. In addition, the plant can be rented out for $20,000 per year if the parts are purchased externally.Required: Should Senior Company buy the part externally or make it internally?
Nelly Technology manufactures a particular computer component. Currently, the costs per unit are asfollows:Direct material P 50Direct labor 500Variable overhead 250Fixed overhead 400Fur Inc. has obtained Nelly with a offer to sell 10,000 units of the component for P1,100 per unit. IfNelly accepts the proposal, P2,500,000 of the fixed overhead will be eliminated. Should Nelly makeor buy the component?
fix my answer: 5)Polaski Company manufactures and sells a single product called a Ret. Operating at capacity, the company can produce and sell 36,000 Rets per year. Costs associated with this level of production and sales are given below: Unit Total Direct materials $ 25 $ 900,000 Direct labor 8 288,000 Variable manufacturing overhead 3 108,000 Fixed manufacturing overhead 7 252,000 Variable selling expense 4 144,000 Fixed selling expense 6 216,000 Total cost $ 53 $ 1,908,000 The Rets normally sell for $58 each. Fixed manufacturing overhead is $252,000 per year within the range of 26,000 through 36,000 Rets per year. Required: Assume due to a recession, Polaski Company expects to sell only 26,000 Rets through regular channels next year. A large retail chain offered to purchase 10,000 Rets if Polaski will accept a 16% discount off the regular price. There would be no sales commissions on this order; thus, variable selling expenses would be slashed by 75%.…