Make-or-Buy, Traditional Analysis Enter the relevant costs of each alternative.BuyDrop Thickness Gauge and MakeLease and MakeXTotal relevant costs.XX2. Suppose that dropping the thickness gauge will decrease sales of the density gauge by 10 percent. What decision should now be made?Keep the thickness gauge and buy the subassembly✓3. Assume that dropping the thickness gauge decreases sales of the density gauge by 10 percent and that 4,144 subassemblies are required per quarter. As before, assume that there are no ending inventories of subassemblies and that all unitsproduced are sold. Assume also that the per-unit sales price and variable costs are the same as in Requirement 1. Include the leasing alternative in your consideration. Now, what is the correct decision?Lease the space and make the subassembly✓ Make-or-Buy, Traditional AnalysisMorrill Company produces two different types of gauges: a density gauge and a thickness gauge. The segmented income statement for a typical quarter follows.DensityGaugeThicknessGaugeTotalSales$ 222,000$ 118,400 $ 340,400Less variable expenses118,40068,080186,480Contribution margin$ 103,600$ 50,320$ 153,920Less direct fixed expenses*29,60056,24085,840Segment margin$ 74,000 $ (5,920)$ 68,08044,400Less common fixed expensesOperating income$ 23,680* Includes depreciation.The density gauge uses a subassembly that is purchased from an external supplier for $25 per unit. Each quarter, 2,960 subassemblies are purchased. All units produced are sold, and there are no ending inventories of subassemblies. Morrill isconsidering making the subassembly rather than buying it. Unit-level variable manufacturing costs are as follows:Direct materials$2Direct labor3Variable overhead2No significant non-unit-level costs are incurred.Morrill is considering two alternatives to supply the productive capacity for the subassembly.1. Lease the needed space and equipment at a cost of $39,960 per quarter for the space and $14,800 per quarter for a supervisor. There are no other fixed expenses.2. Drop the thickness gauge. The equipment could be adapted with virtually no cost and the existing space utilized to produce the subassembly. The direct fixed expenses, including supervision, would be $56,240, $11,840 of which isdepreciation on equipment. If the thickness gauge is dropped, sales of the density gauge will not be affected.Required:1. Should Morrill Company make or buy the subassembly?Make the subassembly✓If it makes the subassembly, which alternative should be chosen?Drop the thickness gauge ✓

Make cost is the cost to product the product internally. Buy cost is the cost to purchase the…

Enter the relevant costs of each alternative. Buy Drop Thickness Gauge and Make Lease and Make X Total relevant costs X X 2. Suppose that dropping the thickness gauge will decrease sales of the density gauge by 10 percent. What decision should now be made? Keep the thickness gauge and buy the subassembly ✓ 3. Assume that dropping the thickness gauge decreases sales of the density gauge by 10 percent and that 4,144 subassemblies are required per quarter. As before, assume that there are no ending inventories of subassemblies and that all units produced are sold. Assume also that the per-unit sales price and variable costs are the same in Requirement 1. Include the leasing alternative in your consideration. Now, what is the correct decision? Lease the space and make the subassembly ✓

Enter the relevant costs of each alternative. Buy Drop Thickness Gauge and Make Lease and Make X Total relevant costs X X 2. Suppose that dropping the thickness gauge will decrease sales of the density gauge by 10 percent. What decision should now be made? Keep the thickness gauge and buy the subassembly ✓ 3. Assume that dropping the thickness gauge decreases sales of the density gauge by 10 percent and that 4,144 subassemblies are required per quarter. As before, assume that there are no ending inventories of subassemblies and that all units produced are sold. Assume also that the per-unit sales price and variable costs are the same in Requirement 1. Include the leasing alternative in your consideration. Now, what is the correct decision? Lease the space and make the subassembly ✓

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

See similar textbooks

Similar questions

Make-or-Buy, Traditional Analysis Morrill Company produces two different types of gauges: a density gauge and a thickness gauge. The segmented income statement for a typical quarter follows. Density Thickness Gauge Gauge Total Sales $ 163,500 $ 87,200 $ 250,700 Less variable expenses 87,200 50,140 137,340 Contribution margin $ 76,300 $ 37,060 $ 113,360 Less direct fixed expenses* 21,800 41,420 63,220 Segment margin $ 54,500 $ (4,360) $ 50,140 Less common fixed expenses 32,700 Operating income $ 17,440 * Includes depreciation. The density gauge uses a subassembly that is purchased from an external supplier for $25 per unit. Each quarter, 2,180 subassemblies are purchased. All units produced are sold, and there are no ending inventories of subassemblies. Morrill is considering making the subassembly rather than buying it. Unit-level variable manufacturing costs are as follows: Direct materials $2 Direct labor 3 Variable overhead
12. Morrill Company produces two different types of gauges: a density gauge and a thickness gauge. The segmented income statement for a typical quarter follows. DensityGauge ThicknessGauge Total Sales $ 151,500 $ 80,800 $ 232,300 Less variable expenses 80,800 46,460 127,260 Contribution margin $ 70,700 $ 34,340 $ 105,040 Less direct fixed expenses* 20,200 38,380 58,580 Segment margin $ 50,500 $ (4,040) $ 46,460 Less common fixed expenses 30,300 Operating income $ 16,160 * Includes depreciation. The density gauge uses a subassembly that is purchased from an external supplier for $25 per unit. Each quarter, 2,020 subassemblies are purchased. All units produced are sold, and there are no ending inventories of subassemblies. Morrill is considering making the subassembly rather than buying it. Unit-level variable manufacturing costs are as follows: Direct materials $2 Direct labor 3…
Use the data to prepare the cost statement and income statement by use the variable cost . The production capacity ( 8 000 )unit , the seal price ( 2000 ) to unit . Direct materials ( 176000) Direct wages ( 128000 ). Direct expenses ( 132000 ) Indirect expenses ( 132000 ). ( 100 000 v. , 32 000 f. ). Marketing cost v. ( 100 000 )D. Administration cost 60000 D. Indirect marketing f. ( 100 000). The balance of f. g. f. ( 2500 ) unit , and the balance of f. g. l. ( 1000 ) unit . The number of sales unit ( ? ) unit
Given the following cost and activity observations for Leno Enterprises'utilities, use the high-low method to calculate Leno's variable utilities cost permachine hour. Cost Machine HoursSeptember £4,100 22,000October £3,700 18,000November £3,900 19,000December £4,500 28,000a) £0.08b) £4.86c) £0.25d) £12.50
Petoskey Company produces three products: Alanson, Boyne, and Conway. A segmented income statement, with amounts given in thousands, follows: Alanson Boyne Conway Total Sales revenue $1,280 $185 $330 $1,795 Less: Variable expenses 1,115 45 264 1,424 Contribution margin $165 $140 $66 $371 Less direct fixed expenses: Depreciation 50 15 11 76 Salaries 95 85 116 296 Segment margin $20 $40 $(61) $-1 Direct fixed expenses consist of depreciation and plant supervisory salaries. All depreciation on the equipment is dedicated to the product lines. None of the equipment can be sold. Assume that each of the three products has a different supervisor whose position would remain if the associated product were dropped. Required: CONCEPTUAL CONNECTION: Estimate the impact on profit that would result from dropping Conway. Enter amount in full, rather than in thousands. For example, "15000" rather than "15".
What is the correct choice? Datamatix Company has gathered the following data: Unit Sales Price Unit Variable Costs Unit Sales Product 1 $18.00 $10.00 24,500 Product 2 27.00 17.00 17,500 Product 3 35.00 28.00 28,000 Fixed costs are $233,280. The weighted-average breakeven point is a. 34,500 units. b. 28,800 units. c. 25,200 units. d. 29,900 units.
Garcia Company produces two different types of gauges: a density gauge and a thickness gauge. The segmented income statement for a typical quarter follows. DensityGauge ThicknessGauge Total Sales $ 150,000 $ 80,000 $ 230,000 Less variable expenses 80,000 46,000 126,000 Contribution margin $ 70,000 $ 34,000 $ 104,000 Less direct fixed expenses* 20,000 38,000 58,000 Segment margin $ 50,000 $ (4,000) $ 46,000 Less common fixed expenses 30,000 Operating income $ 16,000 * Includes depreciation. The density gauge uses a subassembly that is purchased from an external supplier for $25 per unit. Each quarter, 2,000 subassemblies are purchased. All units produced are sold, and there are no ending inventories of subassemblies. Garcia is considering making the subassembly rather than buying it. Unit-level variable manufacturing costs are as follows: Direct materials $2 Direct labor 3…
Use the data to prepare the cost statement and Income statement by use the Total cost and Variable Cost. Production capacity (6000 ) unit, direct materials (35000 )D. Indirect materials ( 15000 )D., direct wages ( 25 000 )D., Indirect wages (30000 )D. direct expenses ( 25000 )D., Indirect expenses ( 30 000 )D.[ 10000 V., 20000 F.). direct marketing cost (13000 )D. Indirect marketing cost ( 12000 )D.( 10000 V. 2000 F. ). Administration cost (22000 )D., number of F.G.L (1000 )unit . The selling price ( 2500 )D., to unit.
Based on analyzing the production.cost (Y) to units produced (X), the following relationship was found Y= S5000 - 520X The $5.000 in the equarion represents Select one Oa. Varlable production.costs per unit. లీ D- 78ed Drodocs on ఉంక ఏ01 Ur 2 ENone.of the anawers given d. Total variable production costs. Oe.Total fixed production costs
The following information is available for Concord Corporation: Total fixed $150000 expenses == Total variable. 320000 expenses Sales Cost of goods sold $570000 370000 A CVP income statement would report O gross profit of $250000, contribution margin of $420000. Ogross profit of $200000. O contribution margin of $250000.
Required information [The following information applies to the questions displayed below.] Information for Pueblo Company follows: Sales Revenue Less: Total Variable Cost Contribution Margin Weighted average CM ratio Product A Product B $ 60,000 $ 31,490 $ 28,510 Required: Determine Pueblo's (overall) weighted-average contribution margin ratio. Note: Do not round intermediate calculations. % $ 57,000 $ 11,800 $ 45,200
A company has following details for this yearDetails Total sales($) Total cost($) Details Total sales($) Total cost($)Year ended 31/12/2018 35,78,998 25,89,709Year ended 31/12/2019 48,90,742 31,67,984 Calculate P/V ratio, Fixed cost, break even sales, Margin of safety 2018/2019, Variable cost 2018/2019and percent of fixed cost 2018/2019