Evaluating relevant cost

Assignment Help Managerial Accounting
Reference no: EM1349826

Question: Ahron Company makes 76,000 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: $14.2
Direct labor: 16.8
Variable manufacturing overhead: 1.5
Fixed manufacturing overhead: 20.7
Unit product cost: $53.2

An outside supplier has offered to sell the company all of these parts it needs for $47.2 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 $553,000 per year.

If the part were purchased from the outside supplier, all of the direct labor cost of the part would be avoided. However, $13.5 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 manufacturing overhead cost would be applied to the company's remaining products.

How much of the unit product cost of $53.2 is relevant in the decision of whether to make or buy the part?

- $16.8
- $39.7
- $32.5
- $53.2

Reference no: EM1349826

Questions Cloud

Explain relationship of price elasticity and total revenue : Describe relationship between price elasticity and total revenue? How does price elasticity of demand affect a firm's pricing decisions?
What effect could discussion of ground rules : Write a description of this team and its task, paying particular attention to the behavioral expectations for which the team members held each other accountable-these might be spoken or unspoken.
Personal definition of attractiveness : What is your own personal definition of attractiveness and how has it changed over time?
How many penguins can stand on the ice block : A rectangular block of ice 12 m on each side and 1.2m thick floats in sea water. The density of the sea water is 1025 kg/m3. The density of ice is 917kg/m3.
Evaluating relevant cost : Ahron Company makes 76,000 units per year of a part it uses in the products it manufactures. The unit product cost of this part is computed as follows:
Explain future off the global automobile industry : Explain What are the implications of this for the future off the global automobile industry?
Measurement of conflict : discussion of the four models of organizational effectiveness and the new conflict management paradigm in your response.
Determine contribution margin : Use the formula Contribution Margin = Revenue - Variable Costs Your top two Agents . call them ... Agent J and Agent K,
Point of view of altruism : Explain your point of view of altruism. Do you believe in altruism? Do you feel it exists? Why or why not? Give an example from your life or someone else's, of altruistic behavior.

Reviews

Write a Review

Managerial Accounting Questions & Answers

  Manage budgets and financial plans

Explain the budgeting process and its importance to a business, identifying the components of different budgets, forecast estimates for inclusion in the budgets.

  Prepare a retained earnings statement

Prepare a retained earnings statement for the year and Prepare a stockholders' equity section of given case.

  Prepare a master budget for the three-month period

Prepare a master budget for the three-month period.

  Construct the companys direct labor budget

Construct the company's direct labor budget for the upcoming fiscal year, assuming that the direct labor workforce is adjusted each quarter to match the number of hours required to produce the forecasted number of units produced.

  Evaluate the predetermined overhead rate

Evaluate the Predetermined Overhead Rate

  Determine the company''s bid

Determine the company's bid if activity-based costing is used and the bid is based upon full manufacturing cost plus 30 percent.

  Compute the pool rates for the different activities

Complete the schedule to compute the pool rates for the different activities.

  Prepare Company financial statements

Prepare Company financial statements

  Prepare an analysis of terracycles

This individual assignment is based on the TerraCycle Inc.

  Discuss the ethical issues

Discuss the ethical issues

  Political resources in emerging markets

Calculate the GDP in Income Approach  and Expenditure Approach

  Management accounting - ehsan electronics company

A new plant accountant suggested that the company may be able to assign support costs to products more accurately by using an activity based costing system that relies on a separate rate for each manufacturing activity that causes support costs.

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd