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. (TCO D) Fouch Company makes 30,000 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 $15.70 Direct Labor $17.50 Variable Manufacturing Overhead $4.50 Fixed Manufacturing Overhead $14.60 Unit Product Cost $52.30 An outside supplier has offered to sell the company all of these parts it needs for $51.90 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 $219,000 per year. If the part were purchased from the outside supplier, all of the direct labor cost of the part would be avoided. However, $6.20 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. Required: i. How much of the unit product cost of $52.30 is relevant in the decision of whether to make or buy the part? ii. What is the net total dollar advantage (disadvantage) of purchasing the part rather than making it? iii. What is the maximum amount the company should be willing to pay an outside supplier per unit for the part if the supplier commits to supplying all 30,000 units required each year?
Question 5. 5. (TCO D) Biello Co. manufactures and sells medals for winners of athletic and other events. Its manufacturing plant has the capacity to produce 15,000 medals each month; current monthly production is 14,250 medals. The company normally charges $115 per medal. Cost data for the current level of production are shown below. Variable Costs Direct Materials $969,000 Direct Labor $270,750 Selling and Administrative $270,075 Fixed Costs Manufacturing $370,550 Selling and Administrative $89,775 The company has just received a special one-time order for 600 medals at $102 each. For this particular order, no variable selling and administrative costs would be incurred. This order would also have no effect on fixed costs.
A 4-for-1 stock split involving the issue of 400,000 shares of $5 par value common stock for 100,000 shares of $20 par value common stock was recorded as a debit to Retained Earnings $2,000,000 and a credit to Common Stock $2,000,000. Prepare the ..
What is the difference between accrual-basis accounting and cash-basis accounting? Why would politicians prefer the cash basis over the accrual basis? Write a letter to your senator explaining why the federal government should adopt the accrual basis..
On January 1, 2010, Gucci Brothers Inc. started the year with a $500,000 credit balance in retained earnings and a $608,000 balance in common stock. During 2010, the company earned net income of $109,000, paid a dividend of $14,200, and issued mor..
The standard costs and actual costs for factory overhead for the manufacture of 2,500 units of actual production are as follows:
describes GASB requirements for accounting for Investment Trust Funds. Include a discussion of when the use of investment trust funds is appropriate;the investments to be included and excluded; the basis at which investments are to be reported;rep..
Compute the profit margin ratio and gross profit rate. Caltor Company's assets at the beginning of the year were $770,000 ,and were $830,000 at the end of the year. To qualify for full credit, you must state the formula you are using, show your co..
Tanner Bay Inc. has two departments, Assembly and Packaging. The company uses a job-order costing system and computes a predetermined overhead rate in each department. What is the predetermined overhead rate to be used in each department? Show comp..
Texas has just passed a law making it mandatory to have every head of cattle inspected at least once a year for a variety of communicable diseases.
What are some examples of positive and negative evidence used to establish the need for a valuation allowance for a tax loss carryforward? What is the effect of the valuation allowance on the free cash flow forecast?
Turner, Inc. uses straight-line depreciation for its equipment. Turner purchased equipment for $500,000 and estimated its useful life at 8 years. The bookkeeper failed to consider the residual value of $50,000. What is the impact on earnings per s..
Compute the predetermined overhead rate. Compute the overhead applied. Find out the amount of overhead that is over or under applied.
The options are exercisable between January 1, 2014, and December 31, 2016, at 81% of the quoted market price on January 1, 2011, which was $16. The fair value of the 20 million options, estimated by an appropriate option pricing model, is $6 per ..
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