Marigoid, Inc. currently manufactures a wicket as its main product. The costs per unit are as follows: Direct materials and direct labor $11 Variable overhead Fixed overhead Total $24 Saran Company has contacted Marigold with an offer to sell it 5500 of the wickets for $18 each. If Marigold makes the wickets, variable costs $5 per unit is unavoidable. Should Marigold make or buy the wickets? Make; savings - $11000 Buy; savings - $16s00 Make; savings - $5500 Buy; savings - $5500
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- Polaris Inc. manufactures two types of metal stampings for the automobile industry: door handles and trim kits. Fixed cost equals 146,000. Each door handle sells for 12 and has variable cost of 9; each trim kit sells for 8 and has variable cost of 5. Required: 1. What are the contribution margin per unit and the contribution margin ratio for door handles and for trim kits? 2. If Polaris sells 20,000 door handles and 40,000 trim kits, what is the operating income? 3. How many door handles and how many trim kits must be sold for Polaris to break even? 4. CONCEPTUAL CONNECTION Assume that Polaris has the opportunity to rearrange its plant to produce only trim kits. If this is done, fixed costs will decrease by 35,000, and 70,000 trim kits can be produced and sold. Is this a good idea? Explain.Country Diner currently makes cookies for its boxed lunches. It uses 40,000 cookies annually in the production of the boxed lunches. The costs to make the cookies are: A potential supplier has offered to sell Country Diner the cookies for $0.85 each. If the cookies are purchased, 10% of the fixed overhead could be avoided. If Jason accepts the offer, what will the effect on profit be?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?
- 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?Vaughn, Inc. currently manufactures a wicket as its main product. Costs per unit are as follows: Direct materials and direct labor $11 Variable overhead Fixed overhead Total 5 8 $24 Saran Company has contacted Vaughn with an offer to sell it 6400 wickets for $18 each. Of Vaughn's $8 per unit fixed cost. $5 per unit is unavoidable. Should Vaughn make or buy the wickets and why? O Make because the cost savings is $12800 ◇ Buy because the cost savings is $6400 ○ Buy because the cost savings is $19200 ○ Make because the cost savings is $6400Sheridan, Inc. currently manufactures a wicket as its main product. Costs per unit are as follows: Direct materials and direct labor $11 Variable overhead Fixed overhead Total 7 9 $27 Saran Company has contacted Sheridan with an offer to sell it 5400 wickets for $21 each. Of Sheridan's $9 per unit fixed cost, $5 per unit is unavoidable. Should Sheridan make or buy the wickets and why? O Make because the cost savings is $16200 O Make because the cost savings is $5400 O Buy because the cost savings is $10800 O Buy because the cost savings is $5400
- Vista Company manufactures electronic equipment. It currently purchases the special switches used in each of its products from an outside supplier. The supplier charges Vista $5.20 per switch. Vista 's CEO is considering purchasing either machine A or machine B so the company can manufacture its own switches. The projected data are as follows: Machine A Machine B Annual fixed costs $ 582, 450 $ 792, 100 Variable cost per switch 1.67 0.75 Required: 1. For each machine, what is the minimum number of switches that Vista must make annually for total costs to equal outside purchase cost? 2. What volume level would produce the same total costs regardless of the machine purchased? 3. What is the most profitable alternative for producing 230,000 switches per year and what is the total cost of that alternative?Daily Kneads, Inc., is considering outsourcing one of its many products rather than making it internally. The supplier will charge $20,000 for 20,000 pounds of the product. The costs per pound to make this product include: Cost per Pound $0.30 Direct Labor Direct Materials $0.60 $0.70 Allocated Unavoidable Overhead If Daily Kneads outsources, what is the savings (or loss) per pound for the company as a whole? If the amount is a loss include a negative sign (not parentheses) in your answer. "_"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?
- Rooney 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* $ 5,200 6,500 3,600 9,300 26,600 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 Rooney for $2.70 each. Required a. Calculate the total relevant cost. Should Rooney continue to make the containers? b. Rooney could lease the space it currently uses in the manufacturing process. If leasing would produce $11,500 per month, calculate the total avoidable costs. Should Rooney continue to make the containers? a. Total relevant cost Should Rooney continue to make the containers? b. Total avoidable cost Should Rooney continue to make the containers?Notson, Inc. produces several models of clocks. An outside supplier has offered to produce the commercial clocks for Notson for $420 each. Notson needs 1,200 clocks annually. Notson has provided the following unit costs for its commercial clocks: Direct materials Direct labor Variable overhead Fixed overhead (40% avoidable) $100 140 80 150 What is the incremental effect on net income if Notson choses to outsource the production of the 1,000 clocks annually? Should Notson make or buy the clocks?Jims Company produces 60,000 type-C earphones with the following costs: Direct Materials P13,000 Direct Labor 15,000 Variable Overhead 3,000 Fixed Overhead 7,000 None of Jims fixed overhead costs can be reduced, but another product could be made that would increase profit by P4,000 if the earphones were acquired externally. If cost minimization is the major consideration and the company would prefer to buy the earphones, what is the maximum external price that Jims would be willing to accept to acquire the 60,000 units externally?