Managerial Accounting
6th Edition
ISBN: 9781259726972
Author: John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting Principles
Publisher: McGraw-Hill Education
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Chapter 10, Problem 2E
Exercise 23-5 Make or buy A1
Gelb Company currently manufactures 40,000 units per year of a key component for its manufacturing process. Variable costs are $1.95 per unit, fixed costs related to making this component are $65,000 per year, and allocated fixed costs are $58,500 per year. The allocated fixed costs are unavoidable whether the company makes or buys this component. The company is considering buying this component from a supplier for $3.50 per unit. Should it continue to manufacture the component, or should it buy this component from the outside supplier? Support your decisions with analysis of the data provided.
Check Increased cost to make, $3,000
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Question 17
Voltaic Electronics uses a standard part in the manufacture of different types of radios. The total cost of producing 35,000
parts is $105,000, which includes fixed costs of $50,000 and variable costs of $55,000. The company can buy the part from
an outside supplier for $2 per unit and avoid 20% of the fixed costs. Assume that the company can use the freed
manufacturing space to make another product that can earn a profit of $16,000. If Voltaic outsources, what will be the effect
on operating income?
O decrease of $10.000
increase of $16,000
increase of $11.000
decrease of $11,000.
G
Exercise 23-2 Make or buy LO P1
Gelb Company currently manufactures 55,500 units per year of a key component for its manufacturing process. Variable costs are
$5.15 per unit, fixed costs related to making this component are $81,000 per year, and allocated fixed costs are $74,500 per year. The
allocated fixed costs are unavoidable whether the company makes or buys this component. The company is considering buying this
component from a supplier for $3.70 per unit.
Calculate the total incremental cost of making 55,500 units and buying 55,500 units. Should it continue to manufacture the
component, or should it buy this component from the outside supplier?
Complete this question by entering your answers in the tabs below.
Costs to Make Costs to Buy
Outside
Supplier
Calculate the total incremental cost of making 55,500 units. (Round "variable cost per unit" answers to 2 decimal places.)
Incremental Costs to Make
Variable cost per unit
Fixed manufacturing costs
Total incremental cost to make…
Question 10.4
Big Machines Corp. has two divisions. Division Y manufactures components that can be sold in the external market place or transferred to Division Z for further processing. The following data relate to Division Y's component product.
Variable manufacturing costs/unit
$925
Fixed costs/unit at capacity
$275
Selling price/unit
$1,800
The capacity of the plant is 2,500 units per year.
Division Z has offered to purchase 350 units from Division Y at a price of $1,600/unit, which is the market price of the component. The manager of Division Y has refused this offer stating that it would only return a rate of 25.00%, when the divisional target return on sales is 28.00%. The Division Y manager also states that additional fixed costs of $195,000 would be required to produce the 350 units.
The corporate required rate of return is 18% of assets and the existing asset base in Division Y is $2,500,000.
Required:
How many units must Division Y sell in order…
Chapter 10 Solutions
Managerial Accounting
Ch. 10 - Prob. 1MCQCh. 10 - Prob. 2MCQCh. 10 - Prob. 3MCQCh. 10 - Prob. 4MCQCh. 10 - Prob. 5MCQCh. 10 - Prob. 1DQCh. 10 - Is nonfinancial information ever useful in...Ch. 10 - What is a relevant cost? Identify the two types of...Ch. 10 - Prob. 4DQCh. 10 - Prob. 5DQ
Ch. 10 - Prob. 6DQCh. 10 - Prob. 7DQCh. 10 - Prob. 8DQCh. 10 - Prob. 9DQCh. 10 - Prob. 10DQCh. 10 - Explain how a price-setter differs from a...Ch. 10 - Prob. 12DQCh. 10 - Prob. 1QSCh. 10 - Prob. 2QSCh. 10 - Prob. 3QSCh. 10 - Prob. 4QSCh. 10 - Prob. 5QSCh. 10 - Prob. 15QSCh. 10 - Prob. 6QSCh. 10 - Prob. 7QSCh. 10 - Prob. 10QSCh. 10 - Prob. 8QSCh. 10 - Prob. 9QSCh. 10 - Prob. 11QSCh. 10 - Prob. 12QSCh. 10 - Prob. 13QSCh. 10 - Prob. 14QSCh. 10 - Prob. 16QSCh. 10 - Prob. 17QSCh. 10 - Prob. 18QSCh. 10 - Raju is & price-taker in a competitive product...Ch. 10 - Prob. 20QSCh. 10 - Prob. 21QSCh. 10 - Prob. 1ECh. 10 - Exercise 23-5 Make or buy A1 Gelb Company...Ch. 10 - Prob. 3ECh. 10 - Prob. 4ECh. 10 - Prob. 5ECh. 10 - Prob. 6ECh. 10 - Exercise 23-11 Sales mix A1 Childress Company...Ch. 10 - Prob. 8ECh. 10 - Prob. 9ECh. 10 - Prob. 10ECh. 10 - Prob. 11ECh. 10 - Prob. 12ECh. 10 - Prob. 13ECh. 10 - Exercise 23-3 Accept new business or nor...Ch. 10 - Prob. 15ECh. 10 - Prob. 1PSACh. 10 - Prob. 2PSACh. 10 - Prob. 3PSACh. 10 - Prob. 4PSACh. 10 - Prob. 5PSACh. 10 - Prob. 6PSACh. 10 - Prob. 1PSBCh. 10 - Prob. 2PSBCh. 10 - Prob. 3PSBCh. 10 - Prob. 4PSBCh. 10 - Prob. 5PSBCh. 10 - Prob. 6PSBCh. 10 - Prob. 10SPCh. 10 - Assume Apple is designing a new smartphone. Each...Ch. 10 - Prob. 2AACh. 10 - Assume Samsung is designing a new smartphone. Each...Ch. 10 - Prob. 1BTNCh. 10 - Prob. 2BTNCh. 10 - Prob. 3BTNCh. 10 - Prob. 4BTNCh. 10 - Prob. 5BTNCh. 10 - Prob. 6BTN
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