MyLab Accounting with Pearson eText -- Access Card -- for Horngren's Accounting, The Financial Chapters (My Accounting Lab)
11th Edition
ISBN: 9780133877502
Author: Tracie L. Miller-Nobles, Brenda L. Mattison, Ella Mae Matsumura
Publisher: PEARSON
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Chapter 25, Problem P25.31BPGB
Making outsourcing decisions
Winter Sports manufactures snowboards. Its cost of making 2, 100 bindings is as follows:
Direct materials $ 17,600 Direct labor 2,600 Variable overhead 2, 120 Fixed overhead 6,800 Totalmanufacturing costs for 2, 100 bindings $ 29,120
Suppose Lewis will sell bindings to Winter Sports for $15 each. Winter Sports would pay $2 per unit to transport the bindings to its manufacturing plant, where it would add its own logo at a cost of $0.40 per binding.
Requirements
1. Winter Sports’s accountants predict that purchasing the bindings from will enable the company to avoid $2, 100 of fixed overhead. Prepare an analysis to showwhether Winter Sports should make or buy the bindings.
2. The facilities freed by purchasing bindings from Lewis can be used to manufacture
another product that will contribute $3,100 to profit. Total fixed costs will be the same as if Winter Sports had produced the bindings. Show which alternative makes the best use of Winter Sports’s facilities: (a) make bindings, (b) buy bindings and leave facilities idle, or (c) buy bindings and make another product.
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Snow Ride manufactures snowboards. Its cost of making 1,900 bindings is as follows:
Direct materials $ 17,590
Direct laabor 3,200
Variable overhead 2,080
Fixed overhead 6,300
Total manufacturing cost for 1,900 bindings $ 29,170
Suppose Livingston will sell bindings to Snow Ride for $13 each. Snow Ride would pay $3 per unit to transport the bindings to its manufacturing plant, where it would add its own logo at a cost of $0.50 per binding.
Requirments:
1. Snow Ride's accountants predict that purchasing the bindings from livingston will enable the company to avoid $2,100 of fixed overhead. Prepare an analysis to show whether Snow Ride should make or buy the bindings.
2. The facilities freed by purchasing bindings from…
Jordan Electronics currently produces the shipping containers it uses to deliver the electronics products it sells. The monthly cost of
producing 9,100 containers follows.
Unit-level materials
Unit-level labor
Unit-level overhead
Product-level costs
Allocated facility-level costs
$ 5,700
6,800
3,900
8,100
27,200
One-third of these costs can be avoided by purchasing the containers.
Russo Container Company has offered to sell comparable containers to Jordan for $2.90 each.
Required
a. Calculate the total relevant cost. Should Jordan continue to make the containers?
b. Jordan could lease the space it currently uses in the manufacturing process. If leasing would produce $12.300 per rhonth, calculate
the total avoidable costs. Should Jordan continue to make the containers?
a. Total relevant cost
Should Jordan continue to make the containers?
b. Total avoidable cost
Should Jordan continue to make the containers?
Baird Electronics currently produces the shipping containers it uses to deliver the electronics products it sells. The monthly cost of
producing 9,100 containers follows.
$ 6,500
6,400
4,100
9,600
27,900
Unit-level materials
Unit-level labor
Unit-level overhead
Product-level costs*
Allocated facility-level costs
*One-third of these costs can be avoided by purchasing the containers.
Russo Container Company has offered to sell comparable containers to Baird for $2.60 each.
Required
a. Calculate the total relevant cost. Should Baird continue to make the containers?
b. Baird could lease the space it currently uses in the manufacturing process. If leasing would produce $11,200 per month, calculate
the total avoidable costs. Should Baird continue to make the containers?
a. Total relevant cost
Should Baird continue to make the containers?
b. Total avoidable cost
Should Baird continue to make the containers?
Chapter 25 Solutions
MyLab Accounting with Pearson eText -- Access Card -- for Horngren's Accounting, The Financial Chapters (My Accounting Lab)
Ch. 25 - Prob. 1QCCh. 25 - Prob. 2QCCh. 25 - Which of the following costs are irrelevant to...Ch. 25 - Prob. 4QCCh. 25 - Prob. 5QCCh. 25 - 6. When companies are price-setters, their...Ch. 25 - Prob. 7QCCh. 25 - Prob. 8QCCh. 25 - Prob. 9QCCh. 25 - Prob. 10QC
Ch. 25 - Prob. 1RQCh. 25 - Prob. 2RQCh. 25 - Prob. 3RQCh. 25 - Prob. 4RQCh. 25 - Prob. 5RQCh. 25 - What is differential analysis?Ch. 25 - Prob. 7RQCh. 25 - Prob. 8RQCh. 25 - Prob. 9RQCh. 25 - Prob. 10RQCh. 25 - Prob. 11RQCh. 25 - Prob. 12RQCh. 25 - Prob. 13RQCh. 25 - Prob. 14RQCh. 25 - Prob. 15RQCh. 25 - Prob. 16RQCh. 25 - Prob. 17RQCh. 25 - Prob. 18RQCh. 25 - Prob. 19RQCh. 25 - Prob. 20RQCh. 25 - Prob. 21RQCh. 25 - Prob. 22RQCh. 25 - Prob. 23RQCh. 25 - Prob. 24RQCh. 25 - Prob. 25RQCh. 25 - Prob. 26RQCh. 25 - Prob. S25.1SECh. 25 - Prob. S25.2SECh. 25 - Prob. S25.3SECh. 25 - Prob. S25.4SECh. 25 - Prob. S25.5SECh. 25 - Prob. S25.6SECh. 25 - Prob. S25.7SECh. 25 - Prob. S25.8SECh. 25 - Prob. E25.9ECh. 25 - Prob. E25.10ECh. 25 - Prob. E25.11ECh. 25 - Prob. E25.12ECh. 25 - Prob. E25.13ECh. 25 - Prob. E25.14ECh. 25 - Prob. E25.15ECh. 25 - Prob. E25.16ECh. 25 - Prob. E25.17ECh. 25 - Making outsourcing decisions Eclipse Systems...Ch. 25 - Prob. E25.19ECh. 25 - Prob. E25.20ECh. 25 - Prob. P25.21APGACh. 25 - Prob. P25.22APGACh. 25 - Making Decisions a product decisions Members of...Ch. 25 - Prob. P25.24APGACh. 25 - Prob. P25.25APGACh. 25 - Prob. P25.26APGACh. 25 - Prob. P25.27BPGBCh. 25 - Prob. P25.28BPGBCh. 25 - Prob. P25.29BPGBCh. 25 - Prob. P25.30BPGBCh. 25 - Making outsourcing decisions Winter Sports...Ch. 25 - Prob. P25.32BPGBCh. 25 - Prob. P25.33CPCh. 25 - Prob. 25.1EI
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