The Assembly Division of Scottish Motors Company has offered topurchase 90,000 batteries from the Electrical Division for £104 per unit.At a normal volume of 250,000 batteries per year, production costs perbattery are as follows:Direct materialsDirect manufacturing laborVariable factory overheadFixed factory overheadTotal£ 40201240£112The Electrical Division has been selling 250,000 batteries per year tooutside buyers at £136 each; capacity is 350,000 batteries per year. TheAssembly Division has been buying batteries from outside sources for£130 each.Required:5a. Should the Electrical Division manager accept the offer? Explain.5b. From the company's perspective, will the internal sales be of anybenefit? Explain.

The decision making for the proposal related to whether the Electrical Division should accept the…

Answered: The Assembly Division of Scottish…

Principles of Accounting Volume 2

19th Edition

ISBN:9781947172609

Author:OpenStax

Publisher:OpenStax

Chapter10: Short-term Decision Making

Section: Chapter Questions

Problem 6PA: Gent Designs requires three units of part A for every unit of Al that it produces. Currently, part A...

See similar textbooks

Similar questions

Gent Designs requires three units of part A for every unit of Al that it produces. Currently, part A is made by Gent, with these per-unit costs in a month when 4.000 units were produced: Variable manufacturing overhead is applied at $1.00 per unit. The other $0.30 of overhead consists of allocated fixed costs. Gent will need 6,000 units of part A for the next years production. Cory Corporation has offered to supply 6,000 units of part A at a price of $7.00 per unit. It Gent accepts the offer, all of the variable costs and $1,200 of the fixed costs will be avoided. Should Gent Designs accept the offer from Cory Corporation?
Hatch Manufacturing produces multiple machine parts. The theoretical cycle time for one of its products is 65 minutes per unit. The budgeted conversion costs for the manufacturing cell dedicated to the product are 12,960,000 per year. The total labor minutes available are 1,440,000. During the year, the cell was able to produce 0.6 units of the product per hour. Suppose also that production incentives exist to minimize unit product costs. Required: 1. Compute the theoretical conversion cost per unit. 2. Compute the applied conversion cost per minute (the amount of conversion cost actually assigned to the product). 3. Discuss how this approach to assigning conversion cost can improve delivery time performance. Explain how conversion cost acts as a performance driver for on-time deliveries.
Erika Company makes 70,000 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 £17.80 Direct labour 19.00 Variable manufacturing overhead 1.00 Fixed manufacturing overhead 17.10 Unit product cost £54.90 An outside supplier has offered to sell the company all of these parts it needs for £48.50 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 £273,000 per year.If the part were purchased from the outside supplier, all of the direct labour cost of the part would be avoided. However, £8.20 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…
Han Products manufactures 32,000 units of part S-6 each year for use on its production line. At this level of activity, the cost per unit for part S-6 is as follows: Direct materials Direct labour Variable overhead Fixed overhead Total cost per part An outside supplier has offered to sell 32,000 units of part S-6 each year to Han Products for £22 per part. If Han Products accepts this offer, the facilities now being used to manufacture part S-6 could be rented to another company at an annual rental of £83,000. However, Han Products has determined that two-thirds of the fixed overhead being applied to part S-6 would continue even if part S-6 were purchased from the outside supplier. Required: Prepare computations to show the net advantage or disadvantage of accepting the outside supplier's offer. (Enter all the answers as positive values. Round your per unit answers to 2 decimal place.) Cost of purchasing Cost of making: Direct materials Direct labour Variable overhead Fixed overhead…
The Assembly Division of SLOWCAR Company has offered to purchase 90,000 batteries from the Electrical Division (ED) for $104 per unit. At a normal volume of 250,000 batteries per year, production costs per battery are: Direct materials $40Direct labor 20Variable factory overhead 12Fixed factory overhead 42Total $114 The Electrical Division has been selling 250,000 batteries per year to outside buyers for $136 each. Capacity is 350,000 batteries/year. The Assembly Division has been buying batteries from outside suppliers for $130 each. Should the Electrical Division manager accept the offer? Will an internal transfer be of any benefit to the company?
Alpha Products manufactures 30,000 units of part S-6 each year for use on its production line. At this level of activity, the cost per unit for part S-6 is as follows: Direct materials £ 3.60Direct labour 10.00Variable overhead 2.40Fixed overhead 9.00Total cost per part £ 25.00 An outside supplier has offered to sell 30,000 units of part S–6 each year to AlphaProducts for £21 per part. If Alpha Products accepts this offer, the facilities now being used to manufacture part S–6 could be rented to another company at an annual rental of £80,000. However, Alpha Products has determined that two-thirds of the fixed overhead being applied to part S-6 would continue even if part S–6 were purchased from the outside supplier Required: (a) Prepare computations to show the net advantage or disadvantage of accepting the outside supplier’s offer. (b) Define the following terms: relevant cost and opportunity cost. (c) ‘If a product line is generating a loss, then that’s pretty good evidence that the…
AlphaBrona Industries manufactures 50,000 components per year. The manufacturing cost of the components was determined as follows: Direct materials $ 80,000 Direct labor 100,000 Variable overhead 30,000 Fixed overhead 60,000 Total $270,000 An outside supplier has offered to sell the component to AlphaBrona for $10 per unit. Fixed costs will remain the same if the component is purchased from an outside supplier. What will be the effect on income if AlphaBrona Industries purchases the component from the outside supplier? a. $290,000 decrease b. $290,000 increase c. $45,000 decrease d. $45,000 increase
Specter Company makes 20,000 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 $25.10Direct labour 18.20Variable manufacturing overhead 2.40Fixed manufacturing overhead 13.40Unit product cost $56.70An outside supplier has offered to sell the company all these parts it needs for $56.00 a unit. Ifthe company accepts this offer, the facilities now being used to make the part could be used tomake more units of a product that is in high demand. The additional contribution margin on thisother product would be $50,000 per year.If the part were purchased from the outside supplier, all the direct labour cost of the part wouldbe avoided. However, $5.10 of the fixed manufacturing overhead cost being applied to the partwould continue even if the part were purchased from the outside supplier. This fixedmanufacturing overhead cost would be applied to the company's remaining products.Required:Part a:Calculate…
Han Products manufactures 30,000 units of part S-6 each year for use on its production line. At this level of activity, the cost per unit for part S-6 is: Direct materials $ 3.60 Direct labor 10.00 Variable manufacturing overhead 2.40 Fixed manufacturing overhead 9.00 Total cost per part $ 25.00 An outside supplier has offered to sell 30,000 units of part S-6 each year to Han Products for $21 per part. If Han Products accepts this offer, the facilities now being used to manufacture part S-6 could be rented to another company at an annual rental of $80,000. However, Han Products has determined that two-thirds of the fixed manufacturing overhead being applied to part S-6 would continue even if part S-6 were purchased from the outside supplier. Required: What is the financial advantage (disadvantage) of accepting the outside supplier’s offer?
Han Products manufactures 40,000 units of part S-6 each year for use on its production line. At this level of activity, the cost per uni for part S-6 is: Direct materials Direct labor Variable manufacturing overhead $ 3.30 12.00 2.70 Fixed manufacturing overhead Total cost per part 6.00 $ 24.00 An outside supplier has offered to sell 40,000 units of part S-6 each year to Han Products for $22 per part. If Han Products accepts this offer, the facilities now being used to manufacture part S-6 could be rented to another company at an annual rental of $90,000. However, Han Products has determined that two-thirds of the fixed manufacturing overhead being applied to part S-6 would continue even if part S-6 were purchased from the outside supplier. Required: What is the financial advantage (disadvantage) of accepting the outside supplier's offer? Answer is complete but not entirely correct. Financial advantage $ 8,000 ×
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?
Beat Company manufactures 8,000 units of a certain component per year. This component is used in the production of the main product. The following are the costs to make the component per unit: Direct materials $4 Direct labor $4 Variable overhead $3 Fixed overhead $5 If Beat Company buys the component from an outside supplier, the company can rent out the released facilities for P12,360 a year. The cost of the component per unit as quoted by the supplier is P15. 25% of fixed overhead applied in the manufacture of the component will continue regardless of what decision is made. For all purchase made by the company, freight and handling costs are applied at 2% of the purchase price. The direct materials cost presented above is exclusive of such freight and handling cost. What is the advantage or disadvantage of buying the component?A. P12,240 advantage B. 24,600 advantage C. 5,400 disadvantage D. 8,600 advantage

SEE MORE QUESTIONS

Recommended textbooks for you

Principles of Accounting Volume 2

Accounting

ISBN:

9781947172609

Author:

OpenStax

Publisher:

OpenStax College

Cornerstones of Cost Management (Cornerstones Ser…

Accounting

ISBN:

9781305970663

Author:

Don R. Hansen, Maryanne M. Mowen

Publisher:

Cengage Learning

Principles of Cost Accounting

Accounting

ISBN:

9781305087408

Author:

Edward J. Vanderbeck, Maria R. Mitchell

Publisher:

Cengage Learning

Principles of Accounting Volume 2

Accounting

ISBN:

9781947172609

Author:

OpenStax

Publisher:

OpenStax College

Cornerstones of Cost Management (Cornerstones Ser…

Accounting

ISBN:

9781305970663

Author:

Don R. Hansen, Maryanne M. Mowen

Publisher:

Cengage Learning

Principles of Cost Accounting

Accounting

ISBN:

9781305087408

Author:

Edward J. Vanderbeck, Maria R. Mitchell

Publisher:

Cengage Learning

SEE MORE TEXTBOOKS