vishuSubject-Accounting Royal Company manufactures 20,000 units of Part R-3 each year for use in its finished products. At this level of activity, the costs per unit for Part R-3 are as follows:Direct materialsDirect laborVariable manufacturing overheadFixed manufacturing overheadTotal cost per partO avoidable costOvariable costO fixed costOsunk cost$4.807.00An outside supplier has offered to sell 20,000 units of Part R-3 to Royal Company for $23.50 per part. If Royal Company accepts the supplier's offer, the facilitiesnow being used to manufacture Part R-3 could be rented out to another company for $150,000 per year. The costs of producing Part R-3 are avoidable: however,Royal Company has determined that $6 of the foxed manufacturing overhead being applied to Part R-3 would continue even if Royal Company purchases Part R-3from the outside supplier,In the context of Royal Company's decision to make or buy Part R-3, the $150,000 rental income is alopportunity cost3.2010.00$25.00

The monetary value of what one sacrifices while determining among multiple alternatives is termed…

Answered: Royal Company manufactures 20,000 units…

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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Box Springs, Inc., makes two sizes of box springs: twin and double. The direct material for the twin is $25 per unit and $40 s used in direct labor, while the direct material for the double is $40 per unit, and the labor cost is $50 per unit. Box Springs estimates it will make 5,000 twins and 9,000 doubles in the next year. It estimates the overhead for each cost pool and cost driver activities as follows: How much does each unit cost to manufacture?
Box Springs. Inc., makes two sizes of box springs: queen and king. The direct material for the queen is $35 per unit and $55 is used in direct labor, while the direct material for the king is $55 per unit, and the labor cost is $70 per unit. Box Springs estimates it will make 4,300 queens and 3,000 kings in the next year. It estimates the overhead for each cost pool and cost driver activities as follows: How much does each unit cost to manufacture?
Remarkable Enterprises requires four units of part A for every unit of Al that it produces. Currently, part A is made by Remarkable, with these per-unit costs in a month when 4,000 units were produced: Variable manufacturing overhead is applied at $1.60 per unit. The other $0.50 of overhead consists of allocated fixed costs. Remarkable will need 8,000 units of part A for the next years production. Altoona Corporation has offered to supply 8,000 units of part A at a price of $8.00 per unit. If Remarkable accepts the offer, all of the variable costs and $2,000 of the fixed costs will be avoided. Should Remarkable accept the offer from Altoona Corporation?
The following product costs are available for Stellis Company on the production of erasers: direct materials, $22,000; direct labor, $35,000; manufacturing overhead, $17,500; selling expenses, $17,600; and administrative expenses; $13,400. What are the prime costs? What are the conversion costs? What is the total product cost? What is the total period cost? If 13,750 equivalent units are produced, what is the equivalent material cost per unit? If 17,500 equivalent units are produced, what is the equivalent conversion cost per unit?
Cool Pool has these costs associated with production of 20,000 units of accessory products: direct materials, $70; direct labor, $110; variable manufacturing overhead, $45; total fixed manufacturing overhead, $800,000. What is the cost per unit under both the variable and absorption methods?
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?
The following product Costs are available for Haworth Company on the production of chairs: direct materials, $15,500; direct labor, $22.000; manufacturing overhead, $16.500; selling expenses, $6,900; and administrative expenses, $15,200. What are the prime costs? What are the conversion costs? What is the total product cost? What is the total period cost? If 7,750 equivalent units are produced, what is the equivalent material cost per unit? If 22,000 equivalent units are produced, what is the equivalent conversion cost per unit?
Five Card Draw manufactures and sells 10,000 units of Aces, which retails for $200, and 8,000 units of Kings, which retails for $170. The direct materials cost is $20 per unit of Aces and $15 per unit of Kings. The labor rate is $30 per hour, and Five Card Draw estimated 64000 direct labor hours. It takes 4 direct labor hours to manufacture Aces and 3 hours for Kings. The total estimated overhead is $128,000. Five Card Draw uses the traditional allocation method based on direct labor hours. A. How much is the gross profit per unit for Aces and Kings? B. What is the total gross profit for the year?
Plata Company has identified the following overhead activities, costs, and activity drivers for the coming year: Plata produces two models of microwave ovens with the following activity demands: The companys normal activity is 21,000 machine hours. Calculate the total overhead cost that would be assigned to Model X using an activity-based costing system: a. 230,000 b. 240,000 c. 280,000 d. 190,000
Mazomanie Farm completed 20,000 units during the quarter and has 2,500 units still in process. The units are 100% complete with regard to materials and 55% complete with regard to conversion costs. What are the equivalent units for materials and conversion?
The Lubbock plant of Morrils Small Motor Division produces a major subassembly for a 6.0 horsepower motor for lawn mowers. The plant uses a standard costing system for production costing and control. The standard cost sheet for the subassembly follows: During the year, the Lubbock plant had the following actual production activity: (a) Production of motors totaled 50,000 units, (b) The company used 82,000 direct labor hours at a total cost of 1,066,000. (c) Actual fixed overhead totaled 556,000. (d) Actual variable overhead totaled 860,000. The Lubbock plants practical activity is 60,000 units per year. Standard overhead rates are computed based on practical activity measured in standard direct labor hours. Required: 1. Compute the variable overhead spending and efficiency variances. 2. CONCEPTUAL CONNECTION Compute the fixed overhead spending and volume variances. Interpret the volume variance. What can be done to reduce this variance?
The Lubbock plant of Morrils Small Motor Division produces a major subassembly for a 6.0 horsepower motor for lawnmowers. The plant uses a standard costing system for production costing and control. The standard cost sheet for the subassembly follows: During the year, the Lubbock plant had the following actual production activity: a. Production of subassemblies totaled 50,000 units. b. A total of 260,000 pounds of raw materials was purchased at 4.70 per pound. c. There were 60,000 pounds of raw materials in beginning inventory (carried at 5 per lb.) There was no ending inventory. d. The company used 82,000 direct labor hours at a total cost of 1,066,000. The Lubbock plants practical activity is 60,000 units per year. Standard overhead rates are computed based on practical activity measured in standard direct labor hours. Required: 1. CONCEPTUAL CONNECTION Compute the materials price and usage variances. Of the two materials variances, which is viewed as the more controllable? To whom would you assign responsibility for the usage variance in this case? Explain. 2. CONCEPTUAL CONNECTION Compute the labor rate and efficiency variances. Who is usually responsible for the labor efficiency variance? What are some possible causes for this variance? 3. CONCEPTUAL CONNECTION Assume that the purchasing agent for the small motors plant purchased a lower-quality raw material from a new supplier. Would you recommend that the plant continue to use this cheaper raw material? If so, what standards would likely need revision to reflect this decision? Assume that the end products quality is not significantly affected. 4. Prepare all possible journal entries.

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