! Required information [The following information applies to the questions displayed below] Rex Metal Fabricators (RMF) buys scrap metal and produces components for buildings and other structures. The purchase contracts specify an average quality level of 86 percent. That is, 86 percent of the metal must be ready for use without further processing. Metal that is not ready can be treated at extra cost by RMF, and this is more cost-effective than scrapping the metal and purchasing additional amounts. The cost of treating the metal requiring further processing is $80 per ton. RMF uses two suppliers: Chopin Yards and Joe Company. During the past year, the purchasing quality data were as follows: Total purchases (tons) Average purchase price (per ton) Percentage requiring further processing Required: Chopin Yards 2,300 Joe Company 1,400 Total 3,700 $ 124.00 $ 128.00 6.0 9.5 $ 125.51 7.3 Assume all else remains the same. What percentage of metal from Chopin Yards that requires further processing would make Rex Metal Fabricators indifferent between buying from Chopin Yards and Joe Company? Note: Enter your answer as a percentage rounded to 1 decimal place (i.e., .321 as 32.1). Indifference point %

! Required information [The following information applies to the questions displayed below] Rex Metal Fabricators (RMF) buys scrap metal and produces components for buildings and other structures. The purchase contracts specify an average quality level of 86 percent. That is, 86 percent of the metal must be ready for use without further processing. Metal that is not ready can be treated at extra cost by RMF, and this is more cost-effective than scrapping the metal and purchasing additional amounts. The cost of treating the metal requiring further processing is $80 per ton. RMF uses two suppliers: Chopin Yards and Joe Company. During the past year, the purchasing quality data were as follows: Total purchases (tons) Average purchase price (per ton) Percentage requiring further processing Required: Chopin Yards 2,300 Joe Company 1,400 Total 3,700 $ 124.00 $ 128.00 6.0 9.5 $ 125.51 7.3 Assume all else remains the same. What percentage of metal from Chopin Yards that requires further processing would make Rex Metal Fabricators indifferent between buying from Chopin Yards and Joe Company? Note: Enter your answer as a percentage rounded to 1 decimal place (i.e., .321 as 32.1). Indifference point %

Cornerstones of Cost Management (Cornerstones Series)

4th Edition

ISBN:9781305970663

Author:Don R. Hansen, Maryanne M. Mowen

Publisher:Don R. Hansen, Maryanne M. Mowen

Chapter19: Capital Investment

Section: Chapter Questions

Problem 31P: Jonfran Company manufactures three different models of paper shredders including the waste...

See similar textbooks

Similar questions

Alderon Enterprises is evaluating a special order it has received for a ceramic fixture to be used in aircraft engines. Alderon has recently been operating at less than full capacity, so the firm's management will accept the order if the price offered exceeds the costs that will be incurred in producing it. You have been asked for advice on how to determine the cost of two raw materials that would be required to produce the order. A) The special order will require 800 gallons of Endor, a highly perishable material that is purchased as needed. Alderon currently has 1,200 gallons of Endor on hand, since the material is used in virtually all of the company's products. The last time endor was purchased, Alderon paid $5.00 per gallon. However, the average price paid for the endor in stock was only $4.75. The market price for the Endor is quite volatile, with the current price at $5.50. If the special order is accepted, Alderon will have to place a new order next week to replace the…
Required:Smoot discovers that Jensen has designed the sculpture using the highest-grade wood available, rather than the standard grade of wood that Wood Creations normally uses.Replacing the grade of wood will lower the cost of direct materials by 50%. However, the redesign will require an additional $1,100 of design cost, and the sculptures will be sold for $2,300 each. Will this design change allow the sculpture to meet its target return on investment in 1a above? Is the cost of wood a locked-in cost?
Sensor Systems manufactures an optical switch that it uses in its final product. The switch has the following manufacturing costs per unit: LOADING... (Click the icon to view the costs.) Direct materials $7.00 Direct labor 2.00 Variable overhead 8.00 Fixed overhead 6.50____________________________ Manufacturing product cost $23.50__________________________ _________________________________ LOADING... (Click the icon to view additional information.) Another company has offered to sell Sensor Systems the switch for $19.00 per unit. If Sensor Systems buys the switch from the outside supplier, the idle manufacturing facilities cannot be used for any other purpose, yet none of the fixed costs are avoidable. Prepare an outsourcing analysis to determine whether Sensor Systems should make or buy the switch. (For the Difference column, use a minus sign or parentheses only when the cost of outsourcing…
ABC company manufactures a particular computer component. Currently, the cost per unit is as follows: Direct Materials;P50, Direct Labor,P500; Variable Overhead,P250; Fixed Overhead,P400XYZ company has obtained with an offer to sell 10,000 units of the component for P1,100 per unit. If ABC accepts the proposal, P2,500,000 of the fixed overhead will be eliminated. Should ABC make or buy the component? Select the correct response: Make due to savings of P3,000,000 Buy due to savings of P1,000,000 Buy due to savings of P2,500,000 Make due to savings of P500,000
Barbardy Company is introducing a new product. The managers are trying to decide whether to make one of its components or buy it from a supplier at a price of P320. The space that could be used to produce the component would have no other use. The following are the data to make the component. Materials P 90 Labor 100 Variable manufacturing overhead 90 Fixed manufacturing overhead 130 Total 410 The estimate reflects 20,000 volume units of the component. Fixed manufacturing overhead consists of depreciation on old machinery. Required: Determine which option is advantageous and by how much? Buy is advantageous by P800,000 Make is advantageous by P800,000 Buy is advantageous by P1,800,000 Make is advantageous by P1,800,000 Group of answer choices 1 2 3 4
A company must decide between scrapping or reworking units that do not pass inspection. The company has 22,000 defective units that cost $6 per unit to manufacture. The units can be sold as is for $2.00 each, or they can be reworked for $4.50 each and then sold for the full price of $8.50 each. If the units are sold as is, the company will be able to build 22,000 replacement units at a cost of $6 each, and sell them at the full price of $8.50 each. What is the incremental income from selling the units as scrap and reworking and selling the units? Should the company sell the units as scrap or rework them? (Enter costs and losses as negative values.)
San Juan, Incorporated, is considering two alternatives: A and B. The costs associated with the alternatives are listed below: Alternative A Alternative B Material costs $ 35,000 $ 57,000 Processing costs 36,000 57,000 Building costs 12,000 28,000 Equipment rental 19,000 19,000 Are the materials costs and processing costs differential in the choice between alternatives A and B? Multiple Choice Neither materials costs nor processing costs are differential. Both materials costs and processing costs are differential. Only processing costs are differential. Only materials costs are differential.
A company with excess capacity must decide between scrapping or reworking units that do not pass inspection. The company has 16,000 defective units that cost $6.00 per unit to manufacture. The units can be a) sold as is for $3.00 each, or b) reworked for $4.50 each and then sold for the full price of $9.00 each. What is the incremental income from selling the units as scrap and reworking and selling the units? Should the company sell the units as scrap or rework them? (Enter costs and losses as negative values.)
Part P40 is a part used in the production of air conditioners at Jackson Corporation. The following costs and data relate to the production of Part P40: Number of parts produced annually 26,000 Fixed costs $41,000 Variable costs $67,000 Total cost to produce $108,000 Jackson Corporation can purchase the part from an outside supplier for $4.50 per unit. If they purchase from the outside supplier, 50% of the fixed costs would be avoided. If Jackson Corporation buys the part, what is the most Jackson Corporation can spend per unit so that operating income is equal to $98,000? Question 23 options: $2.98 $2.19 $3.77 $1.52
A company with excess capacity must decide between scrapping or reworking units that do not pass inspection. The company has 16,000 defective units that cost $6.10 per unit to manufacture. The units can be a) sold as is for $3.40 each, or b) reworked for $4.50 each and then sold for the full price of $9.50 each. What is the incremental income from selling the units as scrap and reworking and selling the units? Should the company sell the units as scrap or rework them?
Refer to the information for Smooth Move Company on the previous page. Suppose a customerwants to have its company logo affixed to each paperweight using a label. Smooth Move wouldhave to purchase a special logo labeling machine that will cost $12,000. The machine will be ableto label the 15,000 units and then it will be scrapped (with no further value). No other fixedoverhead activities will be incurred. In addition, each special logo requires additional direct materials of $0.20.Required:CONCEPTUAL CONNECTION Should Smooth Move accept the special order? By how muchwill profit increase or decrease if the order is accepted?
In its production process, Purple Tree Inc uses a specialized part in the manufacturing of their fancy widget. The costs to make a part are: direct material, $15; direct labor, $27; variable overhead, $15; and applied fixed overhead, $32. Purple Tree has received a quote of $60 from a potential supplier for this part. If Purple Tree buys the part, 75 percent of the applied fixed overhead would continue. They need 12,000 units of the specialized part. Purple Tree Company would be better off by Group of answer choices $60,000 to buy the part. $348,000 to buy the part. $30,000 to manufacture the part. $216,000 to manufacture the part.