Required: 1. What are the alternatives for Basu Company? 2. Assume that none of the fixed cost is avoidable. List the relevant cost(s) of internal production. List the relevant cost(s) of external purchase. 3. Which alternative is more cost effective and by how much?
Q: Problem 16-1 (IAA) Roxas Company reported the following net income: 2020 2021 1,750,000 2,000,000 An…
A: A record is frequently recorded in the main ledger; however, it may alternatively be entered in a…
Q: Given the following: FIFO method: 16 units left in ending inventory. 1/1/2018 Beginning inventory 9…
A: Computation of number of units sold. Opening stock purchases - ending inventory 9 + 14 + 20 + 14 -16…
Q: 5. At the end of each quarter, $4, 000 is placed in an annuity that earns 6%interest, compounded…
A: In the given question $ 4,000 is deposited quarterly and the compounded is being done quarterly.…
Q: Problem 22-09 Management of a firm with a cost of capital of 9 percent is considering a $108,000…
A: Net Present Value = Present Value of Cash outflow - Present Value of cash inflow
Q: On the effective date of the Bravo Corporation's (the Company) S Corporation election (January 1,…
A: Built in gains= 35% tax paid by the S corp on sale or distribution of its assets only if it has any…
Q: A product called Wallaby has revenue of $1,250,000, variable costs of goods sold of $850,000,…
A: If loss making product Wallaby is discontinued then the entire fixed cost will be allocated to other…
Q: Jamison Company gathered the following reconciling information in preparing its June bank…
A: Some of the reasons of mismatching the balance of the pass book with the company book are: Errors…
Q: It is not often that SARS offers tax relief but when it is presented as an option it should be used…
A: Income Tax- The federal, state and local governments levy taxes on the gross income of individuals…
Q: A taxpayer sold machinery for $24,000 on December 31, 2021. The machinery had been purchased on…
A: Assets: Assets are the resources of companies which are acquired for availing the long term benefits…
Q: Thomas is an employer with two employees, Patty and Selma. Patty's wages are $12,450 and Selma's…
A: As per IRS, the maximum FUTA tax rate = 6% It is applicable on first $7000 of gross wages of each…
Q: Identity and explain the three ways to cope with uncertainty in financial forecasts?
A: Financial Forecasting Financial forecasting refers to the process of estimating the performance of…
Q: ABC Corporation is considering a business opportunity that would require an investment of P1,800,000…
A: Bailout Payback Method Investment= P1,800,000 Year Net Cash Flow Salvage Value Cumulative Payback…
Q: Company contains (2) production centers (A, B). and (2) services centers (Maintenance and Fuel), and…
A:
Q: You have been asked to prepare a December cash budget for Ashton Company, a distributor of exercise…
A: Cash budget is one of important budget being prepared in business, which shows expected cash…
Q: made by Wehner. The cost per unit for ABS-43 is as follows: Direct materials $45.75 Direct labor…
A: In order to decide whether Wehner Co should make or buy , relevant cost must be compared. Fixed…
Q: Vendetta Company provided the following information for the current year: Net accounts receivable,…
A: Gross income can be calculated by deducting the cost of goods sold from sales. The sales and cost of…
Q: Instructions On the first day of the fiscal year, a company issues a $1,350,000, 11% , five-year…
A: Interest expense is the expense incurred by the company on the borrowed amount.
Q: When you reward the talents of society values, does it govern social and economic inequalities
A: there is no concept exist like talent because every individual have the unique quality and they have…
Q: recorded. Ducky invests $60,000. Total capital is to be $200,000. Ducky purchases the 20 percent…
A: Journal Entry Here importance of recording the partners admission into the partnership either for…
Q: nstructions: Prepare the entries to record the following independent transactions vith explanations.…
A: The journal entries are prepared to keep the record of day to day transactions of the business on…
Q: Measures of liquidity, solvency, and profitability The comparative financial statements of Marshall…
A: The ratio analysis helps to analyse the financial statements of the business.
Q: If you want to earn 15% annual simple interest on an investment, how much should you pay for a note…
A: Note value = $6750 15% annual interest on $ 6750 = $1012.5 Now we have to calculate rate of…
Q: Cougar Hotel is preparing a cash budget for October. The hotel has $12,000 cash at the ending of…
A: Formula: Ending cash balance without considering borrowings = Beginning balance + Receipts -…
Q: During the year, Proffitts, Inc., had revenue of $67,000 and expenses of $29,000. During the year,…
A: Net income is calculated after deducting the total expenses from the Net revenue. where, Total…
Q: Equipment with a cost of $70,007, an estimated residual value of $4,741, and an estimated life of 14…
A: In the given question, the original estimated life of the asset was 14 years. After it was used for…
Q: A company issued 30 shares of $.50 par value common stock for $12,000. The credit to additional…
A: Introduction: Common stock: Company raises capital by issuing common stock to the public. Splitting…
Q: Shannon’s distributes its beer through a wholesaler, Miller of Denton. The retail selling price for…
A: To find break even point, first we need to calculate to tal fixed costs and then contribution…
Q: Accounts Receivable Accounts Payable Accumulated Depreciation Cost of Goods Sold Depreciation…
A: Solution Concept The operating income is the income that is generated from the operating activities…
Q: Mary Walker, president of Rusco Company, considers $14,000 to be the minimum cash balance for…
A:
Q: Work in Process 160,000 3,760,000 Finished Goods Beg 320,000 720,000 1,200,000 pplied1,920,000 ? ?…
A: Cost of material requestion is the value of raw materials issued for production . It can be used…
Q: 26. Assume an investor purchases bonds at a premium the bonds are to be 1 held as a long-term…
A: Solution Concept When the stated interest rate is less than the market rate of interest , the bond…
Q: On March 1, 2022, Dolor Company purchased 5,000 shares of Susan Incorporated paying P12 each share…
A: As per IAS 39, Financial instruments recognition and measurement, Their is an irrevocable…
Q: 1. SaKanya Company provided the following information on December 31, 2020: Cash in Bank (net of…
A: Current liabilities are those liabilities which are being settled or paid in short period of time,…
Q: . What is the document needed in forming a partnership, and what should this document contain?
A: A partnership is a legally binding agreement between two or more persons to manage and operate a…
Q: tigative services firm that is owned and operated by Shirley Vickers. On November 30, 20Y8, the end…
A: Hello student! Since you have posted multiple sub-questions, we will answer the first 3 sub-parts as…
Q: Principal is $32,000 Interest Rate is 7% Time is 3 years Total Amount Owed (includes…
A: Interest expense = Principal* Rate* Time
Q: 1. TAPULAN KO Company provided the following data for the current year: Inventory, January 1…
A: Cost of goods sold = Inventory, January 1 + Purchases - Purchase Returns and Allowances - Inventory,…
Q: July 2 July 5 July 7 July 9 July 11 July 12 July 15 July 17 July 19 July 20 July 21 July 23 July 25…
A: Journal Entries - Journal Entries are the recording of transactions of the organization. It is…
Q: BAK Corp. is considering purchasing one of two new diagnostic machines. Either machine would make it…
A: Machine A: Net Present value = Present value of cash inflows – Initial cash outflows…
Q: What amount should be reported as cash on december 31, 2022 Huston’s company had a checkbook…
A: Note Check payable to houston dated January 4 2023 is a post dated check Therefore not considered.
Q: PROBLEM 2-3 D, E and F share partnership profits in the ratio of 2:3:5. On September 30, F opted to…
A: Comment- Since we only answer up to 3 sub-parts, we’ll answer the first 3. Please resubmit the…
Q: On January 1, 2020, Dulcinea Company enters a ten-year noncancelable lease for equipment having an…
A: It is finance lease Because use ful life of the asset and non cancelable lease same. Calculation…
Q: Dennis Murphy is a salaried, nonexempt administrative assistant for Dionti Investments and is paid…
A: Normally in a year there are 52 weeks.…
Q: Direction: Encircle the letter of the best answer. 1.) jade invested P200,000 in a repair…
A: Transactions - Transaction are entered into by the organization in the normal course of business. To…
Q: Jupiter Corporation earned net income of $90,000 this year. The company began the year with 600…
A: The weighted average number of shares is based on the number of shares issued and the duration of…
Q: 3,300 1,500 Cost of sales (1,890) (900) Gross profit 1,410 600 Administrative expenses…
A: Non-controlling interest refers to the title right situation when the shareholder contains less than…
Q: $413,800 152,100 42,680 85,000 $693,580 tunity to submit a bid for 2,000 batteries to be delivered…
A: The unit cost that Forever Ready Co should not go is the cost of producing the batteries. The unit…
Q: Account Title Cash in Bank Petty Cash Fund Accounts Receivable Allowance for Bad Debts Notes…
A: The amount of equity is equal to the capital contribution by owner. It is calculated by using the…
Q: 1. Reformulate the segmented income statement using the additional information on activities. Use a…
A: The question is based on the concept of Cost Accounting.
Q: Newark Plastics Corporation developed its overhead application rate from the annual budget. The…
A: The question is based on the concept of Cost Accounting. As per the Bartleby guidelines we are…
-
Question Content Area
Make-or-Buy Decision, Alternatives, Relevant Costs
Each year, Basu Company produces 24,000 units of a component used in microwave ovens. An outside supplier has offered to supply the part for $1.29. The unit cost is:
Direct materials $0.86 Direct labor 0.28 Variable overhead 0.09 Fixed overhead 2.65 Total unit cost $3.88 Required:
1. What are the alternatives for Basu Company?
2. Assume that none of the fixed cost is avoidable. List the relevant cost(s) of internal production.
List the relevant cost(s) of external purchase.
3. Which alternative is more cost effective and by how much?
4. What if $19,560 of fixed overhead is rental of equipment used only in production of the component that can be avoided if the component is purchased? Which alternative is more cost effective and by how much?
by $fill in the blank 7
Step by step
Solved in 2 steps
- Step Costs, Relevant Range Bellati Inc. produces large industrial machinery. Bellati has a machining department and a group of direct laborers called machinists. Each machinist can machine up to 500 units per year. Bellati also hires supervisors to develop machine specification plans and oversee production within the machining department. Given the planning and supervisory work, a supervisor can oversee, at most, three machinists. Bellatis accounting and production history shows the following relationships between number of units produced and the annual costs of supervision and materials handling (by machinists): Required: 1. Prepare a graph that illustrates the relationship between direct labor cost and number of units produced in the machining department. (Let cost of direct labor be the vertical axis and number of units be the horizontal axis.) Would you classify this cost as a strictly variable cost, a fixed cost, or a step cost? 2. Prepare a graph that illustrates the relationship between the cost of supervision and the number of units produced. (Let cost of supervision be the vertical axis and number of units be the horizontal axis.) Would you classify this cost as a strictly variable cost, a fixed cost, or a step cost? 3. Suppose that the normal range of production is between 1,400 and 1,500 units and that the exact number of machinists is currently hired to support this level of activity. Further suppose that production for the next year is expected to increase by an additional 500 units. What is the increase in the cost of direct labor? Cost of supervision?Product Mix Decision, Single Constraint Norton Company produces two products (Juno and Hera) that use the same material input. Juno uses two pounds of the material for every unit produced, and Hera uses five pounds. Currently, Norton has 16,000 pounds of the material in inventory. All of the material is imported. For the coming year, Norton plans to import an additional 8,000 pounds to produce 2,000 units of Juno and 4,000 units of Hera. The unit contribution margin is 30 for Juno and 60 for Hera. Also, assume that Nortons marketing department estimates that the company can sell a maximum of 2,000 units of Juno and 4,000 units of Hera. Norton has received word that the source of the material has been shut down by embargo. Consequently, the company will not be able to import the 8,000 pounds it planned to use in the coming years production. There is no other source of the material. Required: 1. Compute the total contribution margin that the company would earn if it could manufacture 2,000 units of Juno and 4,000 units of Hera. 2. Determine the optimal usage of the companys inventory of 16,000 pounds of the material. Compute the total contribution margin for the product mix that you recommend.Thomas Corporation produces heating units. The following values apply for a part used in their production (purchased from external suppliers): D = 12,500 Q = 250 P = 45 C = 4.50 Required: 1. For Thomas, calculate the ordering cost, the carrying cost, and the total cost associated with an order size of 250 units. 2. Calculate the EOQ and its associated ordering cost, carrying cost, and total cost. Compare and comment on the EOQ relative to the current order quantity. 3. What if Thomas enters into an exclusive supplier agreement with one supplier who will supply all of the demands with smaller, more frequent orders? Under this arrangement, the ordering cost is reduced to 0.45 per order. Calculate the new EOQ and comment on the implications.
- (Appendix 3A) Separating Fixed and Variable Costs, Service Setting Louise McDermott, controller for the Galvin plant of Veromar Inc., wanted to determine the cost behavior of moving materials throughout the plant. She accumulated the following data on the number of moves (from 100 to 800 in increments of 100) and the total cost of moving materials at those levels of moves: Required: 1. Prepare a scattergraph based on these data. Use cost for the vertical axis and number of moves for the horizontal axis. Based on an examination of the scattergraph, does there appear to be a linear relationship between the total cost of moving materials and the number of moves? 2. Compute the cost formula for moving materials by using the high-low method. Calculate the predicted cost for a month with 550 moves by using the high-low formula. (Note: Round the answer for the variable rate to three decimal places and the answer for total fixed cost and total cost to the nearest dollar.) 3. CONCEPTUAL CONNECTION Compute the cost formula for moving materials using the method of least squares. (Note: For the method of least squares, round the variable rate to two decimal places and total fixed cost and total cost to the nearest dollar.) Using the regression cost formula, what is the predicted cost for a month with 550 moves? What does the coefficient of determination tell you about the cost formula computed by regression? 4. CONCEPTUAL CONNECTION Evaluate the cost formula using the least squares coefficients. Could it be improved? Try dropping the third data point (300, 3,400), and rerun the regression.Lampierre makes brass and gold frames. The company computed this information to decide whether to switch from the traditional allocation method to ABC: The estimated overhead for the material cost pool is estimated as $12,500, and the estimate for the machine setup pool is $35,000. Calculate the allocation rate per unit of brass and per unit of gold using: A. The traditional allocation method B. The activity-based costing methodJoint cost allocation McKenzies Soap Sensations, Inc., produces hand soaps with three different scents: morning glory, snowflake sparkle, and sea breeze. The soap is produced through a joint production process thatcosts 30,000 per batch. Each batch produces 14,800 bottles of morning glory hand soap, 12,000bottles of snowflake sparkle hand soap, and 10,000 bottles of sea breeze hand soap at the split-offpoint. Each product is processed further after the split-off point, but the market value of a bottle ofany of the flavors at this point is estimated to be 1.25 per bottle. The additional processing costsof morning glory, snowflake sparkle, and sea breeze hand soap are 10.50, 0.55, and 0.60 perbottle, respectively. Morning glory, snowflake sparkle, and sea breeze hand soap are then sold for2.00, 2.20, and 2.40 per bottle, respectively. Instructions 1. Using the net realizable value method, allocate the joint costs of production to each product. 2. Explain why McKenzies Soap Sensations, Inc., always chooses to process each varietyof hand soap beyond the split-off point. 3. If demand for all products was the same, which product should McKenzies Soap Sensations, Inc., produce in the highest quantity?
- Labor classification trade-off Skidmore Electronics manufactures consumer electronic products. The company has three assembly labor classifications, S-1, S-2, and S-3. The three classifications are paid 15, 18, and 22 per hour, respectively. The assembly activity for a new smartphone is as follows: A product engineer proposes using a higher-rated employee to perform the assembly on the new phone. His analysis has shown that an S-3 employee can perform the assembly in 0.35 hour per unit. A. Determine the Assembly activity cost using the S-3 labor classification. B. Is the product engineers proposal supported?Wrappers Tape makes two products: Simple and Removable. It estimates it will produce 369,991 units of Simple and 146,100 of Removable, and the overhead for each of its cost pools is as follows: It has also estimated the activities for each cost driver as follows: Â How much is the overhead allocated to each unit of Simple and Removable?The following product costs are available for Kellee Company on the production of eyeglass frames: direct materials, $32,125; direct labor, $23.50; manufacturing overhead, applied at 225% of direct labor cost; selling expenses, $22,225; and administrative expenses, $31,125. The direct labor hours worked for the month are 3,200 hours. A. What are the prime costs? B. What are the conversion costs? C. What is the total product cost? D. What is the total period cost? E. If 6.425 equivalent units are produced, what is the equivalent material cost per unit? F. What is the equivalent conversion cost per unit?
- Cost Classification Loring Company incurred the following costs last year: Required: 1. Classify each of the costs using the following table format. Be sure to total the amounts in each column. Example: Direct materials, 216,000. 2. What was the total product cost for last year? 3. What was the total period cost for last year? 4. If 30,000 units were produced last year, what was the unit product cost?Functional-Based versus Activity-Based Costing For years, Tamarindo Company produced only one product: backpacks. Recently, Tamarindo added a line of duffel bags. With this addition, the company began assigning overhead costs by using departmental rates. (Prior to this, the company used a predetermined plantwide rate based on units produced.) Surprisingly, after the addition of the duffel-bag line and the switch to departmental rates, the costs to produce the backpacks increased, and their profitability dropped. Josie, the marketing manager, and Steve, the production manager, both complained about the increase in the production cost of backpacks. Josie was concerned because the increase in unit costs led to pressure to increase the unit price of backpacks. She was resisting this pressure because she was certain that the increase would harm the companys market share. Steve was receiving pressure to cut costs also, yet he was convinced that nothing different was being done in the way the backpacks were produced. After some discussion, the two managers decided that the problem had to be connected to the addition of the duffel-bag line. Upon investigation, they were informed that the only real change in product-costing procedures was in the way overhead costs are assigned. A two-stage procedure was now in use. First, overhead costs are assigned to the two producing departments, Patterns and Finishing. Second, the costs accumulated in the producing departments are assigned to the two products by using direct labor hours as a driver (the rate in each department is based on direct labor hours). The managers were assured that great care was taken to associate overhead costs with individual products. So that they could construct their own example of overhead cost assignment, the controller provided them with the information necessary to show how accounting costs are assigned to products: The controller remarked that the cost of operating the accounting department had doubled with the addition of the new product line. The increase came because of the need to process additional transactions, which had also doubled in number. During the first year of producing duffel bags, the company produced and sold 100,000 backpacks and 25,000 duffel bags. The 100,000 backpacks matched the prior years output for that product. Required: (Note: Round rates and unit cost to the nearest cent.) 1. CONCEPTUAL CONNECTION Compute the amount of accounting cost assigned to a backpack before the duffel-bag line was added by using a plantwide rate approach based on units produced. Is this assignment accurate? Explain. 2. Suppose that the company decided to assign the accounting costs directly to the product lines by using the number of transactions as the activity driver. What is the accounting cost per unit of backpacks? Per unit of duffel bags? 3. Compute the amount of accounting cost assigned to each backpack and duffel bag by using departmental rates based on direct labor hours. 4. CONCEPTUAL CONNECTION Which way of assigning overhead does the best jobthe functional-based approach by using departmental rates or the activity-based approach by using transactions processed for each product? Explain. Discuss the value of ABC before the duffel-bag line was added.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?