Gelb Company currently manufactures 47,500 units per year of a key component for its manufacturing process.Variable costs are $4.05 per unit, fixed costs related to making this component are $85,000 per year, and allocatedfixed costs are $70,500 per year. The allocated fixed costs are unavoidable whether the company makes or buys thiscomponent. The company is considering buying this component from a supplier for $3.70 per unit.Calculate the total incremental cost of making 47,500 units and buying 47,500 units. Should it continue tomanufacture the component, or should it buy this component from the outside supplier?Complete this question by entering your answers in the tabs below.OutsideSupplierCalculate the total incremental cost of making 47,500 units. (Round "variable cost per unit" answers to 2 decimal places.)Incremental Costs to MakeRelevantAmount perUnitCosts to Make Costs to BuyVariable cost per unitFixed manufacturing costsTotal incremental cost to makeRelevantFixed CostsCosts to MakeTotal RelevantCosts$0Costs to Buy >

Incremental cost: Incremental cost is the additional cost incurred by the company if it produces…

Answered: Gelb Company currently manufactures…

Cornerstones of Cost Management (Cornerstones Series)

4th Edition

ISBN:9781305970663

Author:Don R. Hansen, Maryanne M. Mowen

Publisher:Don R. Hansen, Maryanne M. Mowen

Chapter16: Cost-volume-profit Analysis

Section: Chapter Questions

Problem 10E: Schylar Pharmaceuticals, Inc., plans to sell 130,000 units of antibiotic at an average price of 22...

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Lander Parts, Inc., produces various automobile parts. In one plant, Lander has a manufacturing cell with the theoretical capability to produce 450,000 fuel pumps per quarter. The conversion cost per quarter is 9,000,000. There are 150,000 production hours available within the cell per quarter. Required: 1. Compute the theoretical velocity (per hour) and the theoretical cycle time (minutes per unit produced). 2. Compute the ideal amount of conversion cost that will be assigned per subassembly. 3. Suppose the actual time required to produce a fuel pump is 40 minutes. Compute the amount of conversion cost actually assigned to each unit produced. What happens to product cost if the time to produce a unit is decreased to 25 minutes? How can a firm encourage managers to reduce cycle time? Finally, discuss how this approach to assigning conversion cost can improve delivery time. 4. Assuming the actual time to produce one fuel pump is 40 minutes, calculate MCE. How much non-value-added time is being used? How much is it costing per unit? 5. Cycle time, velocity, MCE, conversion cost per unit (theoretical conversion rate actual conversion time), and non-value-added costs are all measures of performance for the cell process. Discuss the incentives provided by these measures.
Dimitri Designs has capacity to produce 30,000 desk chairs per year and is currently selling all 30,000 for $240 each. Country Enterprises has approached Dimitri to buy 800 chairs for $210 each. Dimitris normal variable cost is $165 per chair, including $50 per unit in direct labor per chair. Dimitri can produce the special order on an overtime shift, which means that direct labor would be paid overtime at 150% of the normal pay rate. The annual fixed costs will be unaffected by the special order and the contract will not disrupt any of Dimitris other operations. What will be the impact on profits of accepting the order?
Gelbart Company manufactures gas grills. Fixed costs amount to 16,335,000 per year. Variable costs per gas grill are 225, and the average price per gas grill is 600. Required: 1. How many gas grills must Gelbart Company sell to break even? 2. If Gelbart Company sells 46,775 gas grills in a year, what is the operating income? 3. If Gelbart Companys variable costs increase to 240 per grill while the price and fixed costs remain unchanged, what is the new break-even point?
Oat Treats manufactures various types of cereal bars featuring oats. Simmons Cereal Company has approached Oat Treats with a proposal to sell the company its top selling oat cereal bar at a price of $27,500 for 20,000 bars. The costs shown are associated with production of 20,000 oat bars currently. The manufacturing overhead consists of $3,000 of variable costs with the balance being allocated to fixed costs. Should Oat Treats make or buy the oat bars?
Schylar Pharmaceuticals, Inc., plans to sell 130,000 units of antibiotic at an average price of 22 each in the coming year. Total variable costs equal 1,086,800. Total fixed costs equal 8,000,000. (Round all ratios to four significant digits, and round all dollar amounts to the nearest dollar.) Required: 1. What is the contribution margin per unit? What is the contribution margin ratio? 2. Calculate the sales revenue needed to break even. 3. Calculate the sales revenue needed to achieve a target profit of 245,000. 4. What if the average price per unit increased to 23.50? Recalculate: a. Contribution margin per unit b. Contribution margin ratio (rounded to four decimal places) c. Sales revenue needed to break even d. Sales revenue needed to achieve a target profit of 245,000
Hatch Manufacturing produces multiple machine parts. The theoretical cycle time for one of its products is 65 minutes per unit. The budgeted conversion costs for the manufacturing cell dedicated to the product are 12,960,000 per year. The total labor minutes available are 1,440,000. During the year, the cell was able to produce 0.6 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 minute (the amount of conversion cost actually assigned to the product). 3. Discuss how this approach to assigning conversion cost can improve delivery time performance. Explain how conversion cost acts as a performance driver for on-time deliveries.
Gelb Company currently manufactures 46,500 units per year of a key component for its manufacturing process. Variable costs are $7.35 per unit, fixed costs related to making this component are $75,000 per year, and allocated fixed costs are $72,500 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 46,500 units and buying 46,500 units. Should it continue to manufacture the component, or should it buy this component from the outside supplier?
Gelb Company currently manufactures 52,000 units per year of a key component for its manufacturing process. Variable costs are $7.35 per unit, fixed costs related to making this component are $67,000 per year, and allocated fixed costs are $82,500 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 $3.90 per unit. Calculate the total incremental cost of making 52,000 units and buying 52,000 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. Outside Supplier Calculate the total incremental cost of making 52,000 units. (Round "variable cost per unit" answers to 2 decimal places.) Incremental Costs to Make Relevant Amount per Unit Costs to Make Costs to Buy Variable cost per unit Fixed manufacturing costs Total incremental cost to make…
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?
Goldberg Company currently manufactures 52,000 units per year of a key component for its manufacturing process. Variable costs are $4.05 per unit, fixed costs related to making this component are $69,000 per year, and allocated fixed costs are $70,500 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 52,000 units and buying 52,000 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. Outside Costs to Make Costs to Buy Supplier Calculate the total incremental cost of making 52,000 units. (Round "variable cost per unit" answers to 2 decimal places.) Incremental Costs to Make Relevant Amount per Unit Total Relevant Relevant Fixed Costs Costs Variable cost per unit Fixed…
Goldberg Company currently manufactures 52,000 units per year of a key component for its manufacturing process. Variable costs are $4.05 per unit, fixed costs related to making this component are $69,000 per year, and allocated fixed costs are $70,500 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 52,000 units and buying 52,000 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. Outside Costs to Make Costs to Buy Supplier Calculate the total incremental cost of buying 52,000 units. (Round "purchase price per unit" answers to 2 decimal places.) Incremental Costs to Buy Relevant Amount per Relevant Fixed Costs Total Relevant Costs Unit Purchase price per unit Total incremental…
Goldberg Company currently manufactures 52,000 units per year of a key component for its manufacturing process. Variable costs are $4.05 per unit, fixed costs related to making this component are $69,000 per year, and allocated fixed costs are $70,500 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 52,000 units and buying 52,000 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. Outside Costs to Make Costs to Buy Supplier Should it continue to manufacture the component, or should it buy this component from the outside supplier? Should Gelb make the part or purchase it from the outside supplier?

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