A manufacturing firm is considering two locations for a plant to produce a new product. The two locations have fixed and variable costs as follows: Location A Location B Monthly Fixed Cost ( $ ) $16000 $34000 Unit variable cost ( $ /unit) (including labor, material and transportation cost) $20 $5 Which one of the the following monthly production volume is closest to the volume where the company would be indifferent between the two locations ?

A manufacturing firm is considering two locations for a plant to produce a new product. The two locations have fixed and variable costs as follows: Location A Location B Monthly Fixed Cost ( $ ) $16000 $34000 Unit variable cost ( $ /unit) (including labor, material and transportation cost) $20 $5 Which one of the the following monthly production volume is closest to the volume where the company would be indifferent between the two locations ?

Cornerstones of Cost Management (Cornerstones Series)

4th Edition

ISBN:9781305970663

Author:Don R. Hansen, Maryanne M. Mowen

Publisher:Don R. Hansen, Maryanne M. Mowen

Chapter17: Activity Resource Usage Model And Tactical Decision Making

Section: Chapter Questions

Problem 18E: A company is considering a special order for 1,000 units to be priced at 8.90 (the normal price...

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A company is considering a special order for 1,000 units to be priced at 8.90 (the normal price would be 11.50). The order would require specialized materials costing 4.00 per unit. Direct labor and variable factory overhead would cost 2.15 per unit. Fixed factory overhead is 1.20 per unit. However, the company has excess capacity, and acceptance of the order would not raise total fixed factory overhead. The warehouse, however, would have to add capacity costing 1,300. Which of the following is relevant to the special order? a. 11.50 b. 1.20 c. 7.35 d. 8.90
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?
Example 5: Potential locations X, Y and Z have the cost structures shown below. The ABC company has a demand of 1,30,000 units of a new product. Three potential locations X, Y and Z having following cost structures shown are available. Select which location is to be selected and also identify the volume ranges where each location is suited? Location X Location Y Location Z Fixed Costs Rs. 150,000 Rs. 350,000 Rs. 950,000 Variable Costs Rs. 10 Rs. 8 Rs. 6
Please answer both of the questions. Number of Workers Monthly Fixed Costs Range of Outputs 1 60 0 to 50 3 120 51 to 150 5 200 151 to 250 1. Using the table above, what is the break-even point for 3 workers? 1. 42 2. 60 3. 30 4. 100 2. If it costs $100,000 to operate a factory monthly that makes doodads for $42 variable cost each or the company can purchase the doodads for $50 each with no fixed costs what is the difference in monthly cost between the make or buy options if the monthly volume is forecasted to be 10,000 doodads?
A home furnishing company is trying to compare three convenient alternative locations To establish the new factory, and you have data about the expected costs of establishing a new factory As in the following table: (A, B, C) in three governorates: sale price per one variable cost, per unit Annual fixed costs Site ( A ) 30 000 80 130 ( B ) 90 000 50 130 ( C ) 120 000…
Rundle 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 One-third of these costs can be avoided by purchasing the containers. Russo Container Company has offered to sell comparable containers to Rundle for $2.60 each. Required a. Calculate the total relevant cost. Should Rundle continue to make the containers? b. Rundle could lease the space it currently uses in the manufacturing process. If leasing would produce $11,600 per month, calculate the total avoidable costs. Should Rundle continue to make the containers? Answer is complete but not entirely correct. $ a. Total relevant cost a. Should Rundle continue to make the containers? b. Total avoidable cost b. Should Rundle continue to make the containers? 190.650,000 Yes $24,180,000 $ 5,200 6,100 4,000 7,800…
Curiumber Enterprises is considering manufacturing a new product. It projects the cost of direct materials and rent for a range or output as follows. Output in Units 1,000 2,000 3,000 4,000 5,000 6,000 7,000 8,000 9,000 Rent Cost 11.000 $5,290 5,290 8,464 8,464 8,464 8,464. 8,464 8.464 10.580 10,000 10,580 10.580 Direct Materials $4,200 7,200 7,200 9,600. 12,000 14,400 16.800 19,200 30.999 37,030 46.552
Developing an Equation from Average CostsParadise Pub is a high-end dog hotel located in New York. Assume that in March, when dog-days occupancy was at an annual low of 500 days, the average cost per dog-day was $26. In July, when dog-days were at a capacity level of 4,500, the average cost per dog-day was $10.(a) Develop an equation for monthly operating costs. (Let X = dog-days per month)Total cost = $ _________ + $ _________ * _______ (b) Determine the average cost per dog-day at an annual volume of 28,000 dog-days. (Round to the nearest cent.) $ ___________
The Northern Company manufactures 2,800 units per year. The full manufacturing costs per unit are as follows: Direct materials Direct labor Variable manufacturing overhead Average Total $2.00 8.00 6.00 fixed manufacturing overhead 6.00 $22.00 The Southern Company has offered to sell Northern Company 2,800 units for $15 per unit. If Northern Ring Company accepts the offer, $14,000 of fixed overhead will be eliminated. Northern should: Select one: о a. Buy the units: the savings is $16.800 о b. Buy the units; the savings is $33,600 о c. Make the units; the savings is $2.800 о d. Make the units; the savings is $16.800
Paxton Company can produce a component of its product that incurs the following costs per unit: direct materials, $10.50; direct labor, $14.50, and incremental overhead $3.50. An outside supplier has offered to sell the product to Paxton for $37.00. Compute the net incremental cost or savings of buying the component. Multiple Choice $3.50 cost per unit $8 5 savings per unit. $0 cost or savings per unit $8.50 cost per unit. $3.50 savings per unit
MLBC Corp. manufactures a particular product component. Manufacturing costs per unit for 10,000 units are as follows: Prime cost 550 Variable overhead 250 Fixed overhead 400 Total 1,200 A company offered the component for a price of 1,100 per unit. If accepted, a total of 2,500,000 of fixed overhead will be eliminated. What is the total incremental benefit (cost) if offer is accepted?
Write a linear cost function equation for each of the following conditions. Use y for estimated costsand X for activity of the cost driver.a. Direct materials cost is $2.70 per pound b. Total cost is fixed at $800 per month regardless of the number of units produced. c. Auto rental has a fixed fee of $90.00 per day plus $1.75 per mile driven. d. Machine operating costs include $1,000 of maintenance per month, and $15.00 of coolant usagecosts for each day the machinery is in operation.

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	Location A	Location B
Monthly Fixed Cost ( $ )	$16000	$34000
Unit variable cost ( $ /unit) (including labor, material and transportation cost)	$20	$5