Stripe Company has been purchasing a component, Part Q, for P19.20 per unit. Stripe is currently operating at 70% of capacity, and no significant increase in production is anticipated in the near future. The cost of manufacturing a unit of Part Q is estimated as follows: Direct materials P11.50 Direct labor 4.50 Variable factory overhead 1.12 Fixed factory overhead 3.15 Total P20.27 Should the company make or buy the component? Prepare a differential analysis report dated March 12 of the current year to support your answe

Stripe Company has been purchasing a component, Part Q, for P19.20 per unit. Stripe is currently operating at 70% of capacity, and no significant increase in production is anticipated in the near future. The cost of manufacturing a unit of Part Q is estimated as follows: Direct materials P11.50 Direct labor 4.50 Variable factory overhead 1.12 Fixed factory overhead 3.15 Total P20.27 Should the company make or buy the component? Prepare a differential analysis report dated March 12 of the current year to support your answe

Cornerstones of Cost Management (Cornerstones Series)

4th Edition

ISBN:9781305970663

Author:Don R. Hansen, Maryanne M. Mowen

Publisher:Don R. Hansen, Maryanne M. Mowen

Chapter17: Activity Resource Usage Model And Tactical Decision Making

Section: Chapter Questions

Problem 18E: A company is considering a special order for 1,000 units to be priced at 8.90 (the normal price...

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A company is considering a special order for 1,000 units to be priced at 8.90 (the normal price would be 11.50). The order would require specialized materials costing 4.00 per unit. Direct labor and variable factory overhead would cost 2.15 per unit. Fixed factory overhead is 1.20 per unit. However, the company has excess capacity, and acceptance of the order would not raise total fixed factory overhead. The warehouse, however, would have to add capacity costing 1,300. Which of the following is relevant to the special order? a. 11.50 b. 1.20 c. 7.35 d. 8.90
The internal manufacturing cost per unit of a component is as follows – Direct Material $5.00 Direct Labour $10.00 Fixed costs $15.00 Total costs $30.00 (a) Given the information above, if the company buys the component, it would however have to pay $17.00, but would still have to meet its fixed cost. Should the company make or buy the component? (b) Based on your answer in (a) above name two factors that can influence the company to buy the product. 2. (a) Describe two (2) methods for allocating support costs to departments. (b) Explain why support costs are allocated to departments. Please answer question 2 thank you very much.
The internal manufacturing cost per unit of a component is as follows – Direct Material $5.00 Direct Labour $10.00 Fixed costs $15.00 Total costs $30.00 (a) Given the information above, if the company buys the component, it would however have to pay $17.00, but would still have to meet its fixed cost. Should the company make or buy the component? (b) Based on your answer in (a) above name two factors that can influence the company to buy the product. 2. (a) Describe two (2) methods for allocating support costs to departments. (b) Explain why support costs are allocated to departments.
Company XYZ is conducting an engineering economic analysis to decide whether to make vs purchase position for a necessary element needed ins several products. Now the engineering department has established this information: Option A to purchase 10,000 units annually at a fixed price of $8.50 per unit. The cost of placing the order is insignificant as per the present cost accounting procedure. Option B to manufacture 10,000 units annually with a direct labor cost of $1.50 per unit, manufacturing overhead cost is allotted at 200% of direct labor (which is $3.00 per unit) ) and Direct materials cost at $5.00 per unit. Based on the information, should the unit be purchased or manufactured?
What is the net advantage (disadvantage) of purchasing the part rather than making it? Ahringer Company makes 50,000 units per year of a part it uses in the products it manufactures. The unit product cost of this part is computed as follows: Direct materials P19.10 Direct labor 21.70 Variable manufacturing overhead Fixed manufacturing overhead Unit product cost 2.10 14.20 P57.10 An outside supplier has offered to sell the company all of these parts it needs for P50.10 a unit. If the company accepts this offer, the facilities now being used to make the part could be used to make more units of a product that is in high demand. The additional contribution margin on this other product would be P135,000 per year. If the part were purchased from the outside supplier, all of the direct labor cost of the part would be avoided. However, P9.30 of the fixed manufacturing overhead cost being applied to the part would continue even if the part were purchased from the outside supplier. This fixed…
Adams Electronics currently produces the shipping containers it uses to deliver the electronics products it sells. The monthly cost of producing 9,300 containers follows. Unit-level materials Unit-level labor Unit-level overhead Product-level costs* Allocated facility-level costs $5,900 6,200 3,500 *One-third of these costs can be avoided by purchasing the containers. Russo Container Company has offered to sell comparable containers to Adams for $2.60 each. Required X Answer is complete but not entirely correct. $ 19,300 Yes $ 24,180 X No 11,100 26,900 a. Calculate the total relevant cost. Should Adams continue to make the containers? b. Adams could lease the space it currently uses in the manufacturing process. If leasing would produce $11,800 per month, calculate the total avoidable costs. Should Adams continue to make the containers? a. Total relevant cost a. Should Adams continue to make the containers? b. Total avoidable cost b. Should Adams continue to make the containers?
Nelly Technology manufactures a particular computer component. Currently, the costs per unit are asfollows:Direct material P 50Direct labor 500Variable overhead 250Fixed overhead 400Fur Inc. has obtained Nelly with a offer to sell 10,000 units of the component for P1,100 per unit. IfNelly accepts the proposal, P2,500,000 of the fixed overhead will be eliminated. Should Nelly makeor buy the component?
Swifty's Manufacturing Company can make 100 units of a necessary component part with the following costs: Direct Materials Direct Labor Variable Overhead Fixed Overhead $117000 22000 49000 30000 If Swifty's Manufacturing Company purchases the component externally, $20000 of the fixed costs can be avoided. What is the maximum amount Swifty is willing to pay to purchase the 100 units? $218000 O $188000 $198000 $208000
Rundle Electronics currently produces the shipping containers it uses to deliver the electronics products it sells. The monthly cost of producing 9,300 containers follows. 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 Rundle for $2.60 each. Required a. Calculate the total relevant cost. Should Rundle continue to make the containers? b. Rundle could lease the space it currently uses in the manufacturing process. If leasing would produce $11,600 per month, calculate the total avoidable costs. Should Rundle continue to make the containers? Answer is complete but not entirely correct. $ a. Total relevant cost a. Should Rundle continue to make the containers? b. Total avoidable cost b. Should Rundle continue to make the containers? 190.650,000 Yes $24,180,000 $ 5,200 6,100 4,000 7,800…
Paxton Company can produce a component of its product that incurs the following costs per unit: direct materials, $10.50; direct labor, $14.50, and incremental overhead $3.50. An outside supplier has offered to sell the product to Paxton for $37.00. Compute the net incremental cost or savings of buying the component. Multiple Choice $3.50 cost per unit $8 5 savings per unit. $0 cost or savings per unit $8.50 cost per unit. $3.50 savings per unit
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?
Harmony is currently producing 100 units of a necessary component part by incurring $60,000 in direct materials, $12,500 in direct labour, $22,500 in variable overhead, and $15,000 in fixed overhead. If Harmony purchases the component externally, $10,000 of fixed costs can be avoided. What is the external price where the company is indifferent between buying and selling? $950 $1,050 O $1,000 O $1,100 Save for Later Submit Answer