Reference no: EM132279432
Questions -
Q1. Wilma Company must decide whether to make or buy some of its components. The costs of producing 60,500 switches for its generators are as follows.
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Direct materials
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$29, 500
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Variable overhead
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$44,400
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Direct labor
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$21,480
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Fixed overhead
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$83,500
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Instead of making the switches at an average cost of $2.96 ($179,080 ÷ 60,500), the company has an opportunity to buy the switches at $2.70 per unit. If the company purchases the switches, all the variable costs and one -fourth of the fixed costs will be eliminated.
Prepare an incremental analysis showing whether the company should buy the switches.
Q2. Maize Company incurs a cost of $34.51 per unit, of which $20.13 is variable, to make a product that normally sells for $57.35. A foreign wholesaler offers to buy 6,100 units at $30.17 each. Maize will incur additional costs of $1.09 per unit to imprint a logo and to pay for shipping. Compute the increase or decrease in net income Maize will realize by accepting the special order, assuming Maize has sufficient excess operating capacity.
Q3. Gator Corporation manufactures several types of accessories. For the year, the gloves and mittens line had sales of $488,000, variable expenses of $362,000, and fixed expenses of $150,000. Therefore, the gloves and mittens line had a net loss of $24,000. If Gator eliminates the line, $38,000 of fixed costs will remain. Prepare an analysis showing whether the company should eliminate the gloves and mittens line.