What is the financial advantage (disadvantage) of making the 61,000 starters instead of buying them from an outside supplier?
Q: Exeter Division of Wetherby Labs acquired an asset with a cost of $800,000 and a four-year life. The…
A: 1. Residual Income :The residual income valuation model values a company as the sum of book value…
Q: XYZ Company purchased inventory worth $50,000 on credit terms of 2/10, n/30. Calculate the amount…
A: The discount period refers to a specific timeframe during which a buyer can avail themselves of a…
Q: Mendez Company is considering a capital project that costs $16,000. The project will deliver the…
A: The objective of the question is to calculate the payback period for the investment made by Mendez…
Q: Dynamo Manufacturing paid cash to acquire the assets of an existing company. Among the assets…
A: Intangible asset amortization shows how the asset's consumption or expiry is acknowledged over time.…
Q: Ayayai Company has prepared a graph of flexible budget data. At zero direct labor hours, the total…
A: Total budgeted cost equation is the one which represents the elements and fixed and variable cost in…
Q: Reading Corporation uses part W66 in one of its products. The company's Accounting Department…
A: Relevant costing is a costing technique that eliminates the usage of historical or unavoidable costs…
Q: Come-Clean Corporation produces a variety of cleaning compounds including Grit 337 and Sparkle…
A: Incremental revenue per jar = Revenue per jar of silver polish - Revenue per 1/4th pound of Grit…
Q: Steinberg Corporation and Dietrich Corporation an more levered. Both companies will remain in…
A: Equity involves ownership in a company without a contractual obligation for repayment but may…
Q: On August 15, 2023, Japan Ideas consigned 750 electronic play systems, costing $100 each, to…
A: Both parties may benefit from consignment. It gives the consignor the opportunity to reach a larger…
Q: any has a December 31 year end. In year 7 it bought a piece of equipment at the start of the year…
A: “Since you have posted a question with multiple sub-parts, we will provide the solution only to the…
Q: Murphy Incorporated, which produces a single product, has provided the following data for its most…
A: There are two types of costing system followed by the organization which are-(1) Absorption costing…
Q: The Millard Division's operating data for the past two years are provided below: Return on…
A: Lets understand the basics.Formula for calculating net operating income are,First we will need to…
Q: Refer to the following selected financial information from Texas Electronics. Compute the company's…
A: Working Capital is the amount used to fund the short-term expenses of a business. The current assets…
Q: *Your wer is incorrect Bonita Corporation, which operates an amusement park, is considering a…
A: The question is related to Capital Budgeting. The Net Present value is calculated with the help of…
Q: Moose and Suzie
A: Working note 1] Depreciation Useful life: 40 years for new construction, 1 to 30 years for building…
Q: The following budgeted and actual volume and cost data are for July of this year: Volume Budgeted…
A: The static budget analysis is prepared to measure the difference between the actual output and the…
Q: Peng Company is considering buying a machine that will yield income of $2,400 and net cash flow of…
A: RATIO ANALYSISRatio analysis is the process of determining and interpreting numerical relationships…
Q: All of Pocast Corporation's sales are on account. 60% percent of the credit sales are collected in…
A: Introduction:While preparing cash budget, all cash receipts and all cash expenses are needed to be…
Q: Whitman Company has just completed its first year of operations. The company's absorption costing…
A: The income statement is prepared using different methods as variable and absorption costing. The…
Q: 03 aces Game-On Sports operates in two distinct segments: athletic equipment and accessories. The…
A: The statement of comprehensive income is the profit earned and loss incurred during the period…
Q: Heritage Company uses a job-order costing system to assign costs to jobs. It had no work in process…
A: Job costing refers to the method of cost estimation which helps the management to track the costs.…
Q: Required information [The following information applies to the questions displayed below] Shadee…
A: A budgeted income statement refers to the calculation of net income expected in the coming year. The…
Q: Suppose that Nike® purchased a building on January 2 by signing a long-term $2616000 mortgage with…
A: Interest for first payment = Amount borrowed x interest rate x No. of months/12 months=…
Q: WRT, a calendar year S corporation, has 100 shares of outstanding stock. At the beginning of the…
A: Wallace owned all 100 shares.20 shares to his brother.35 shares to his daughter.
Q: Changes in Various Ratios Presented below is selected information for Turner Company: Sales revenue…
A: Ratio Analysis is an the relationship between two different Variables of finanncial Statement to…
Q: Pizana Computer Company has been purchasing carrying cases for its portable computers at a purchase…
A: Working Notes:Total factory overhead per unit = Direct labor cost * Rate of factory overhead= $16 *…
Q: Problem 10.12 (L02) Budget Relationships The accountant at Supreme Audio resigned while he was in…
A: Budgeting is a systematic and strategic financial planning process that involves creating a detailed…
Q: art 067 is used in one of Broce Corporation's products. The company's Accounting Department reports…
A: The differential analysis is performed to compare the different alternatives available with the…
Q: Alpesh
A: The journal entries are prepared to record the transactions on regular basis. The dividend is…
Q: Cullumber Corp. reported net incomes for the past three years as follows: 2023 $248,000 1 During the…
A: A comparative income statement provides information on the financial state of a firm over different…
Q: Crane Hardware has four employees who are paid on an hourly basis plus time-and-a-half for all hours…
A: Payroll: It can be defined as a detailed summary or list of all the employees working in an…
Q: Required: 1. Prepare a vertical analysis of the balance sheet data for 2025 and 2024. Express each…
A: VERTICAL ANALYSIS OF BALANCE SHEETVertical analysis is a proportional analysis of financial…
Q: Rotorua Products, Limited, of New Zealand markets agricultural products for the burgeoning Asian…
A: Trends in accounting refer to the patterns, movements, or changes in financial data or performance…
Q: Shannon Company segments its income statement into North and South Divisions. The company's overall…
A: The contribution margin is calculated as the difference between sales and variable costs. The…
Q: Explain the concept of the matching principle in accounting and its significance in the preparation…
A: The matching principle is an account concept that's abecedarian to addendum account. It states that…
Q: Marian Company reported the following items for the month of July: Sales revenue $470,300 Cost of…
A: Days inventory outstanding is calculated by dividing 365 days by inventory turnover ratio. The…
Q: Ganado Europe (A). Using facts in the chapter for Ganado Europe, assume the exchange rate on January…
A: The loss incurred when someone swaps one floating currency for another and then trades back into the…
Q: Total shareholders' equity, beginning balances Common stock and additional paid-in capital:…
A: (1) Total Payout: It is a broader term that encompasses any form of payment made by a company to its…
Q: xpeditions Incorporated and BookItNow compete as online travel agencies. The following amounts were…
A: Profitability ratios are very important because they are used to measure the profitability of a…
Q: The Delmar Beverage Company produces a premium root beer that is sold throughout its chain of…
A: Variable cost Depends upon the production of goods or services that is increment of sales increases…
Q: The Sarbanes-Oxley Act achieved all of the following except Select one: a. Limits the non-audit…
A: SOX introduced various reforms to protect investors and enhance the accuracy and reliability of…
Q: Nelson has the following potential liabilities: Davis, a former employee, has sued Nelson for…
A: The contingent liability is recorded for foreseen future losses that have been reliably estimated…
Q: Spreadsheet for Statement of Cash Flows For Current Year Ended December 31
A: We need to prepare the statement of cash flows. But the method under which it is prepared is not…
Q: Marigold Corp. produces a product that requires 2.60 pounds of materials per unit. The allowance for…
A: Under standard costing the cost will be estimated at the beginning based on past data on cost. Then…
Q: For the below cash flow, what is the income at the start of 7th year? $50,000 -$20,000 Year: 0 1…
A: Income is the amount of cash flows which is left after deducting the negative cash flows from…
Q: to two decimals, if needed a) What was the regular selling price? b) What was the reduced selling…
A: Selling price of a product is calculated by considering its cost of production, other overhead…
Q: Lavage Rapide is a Canadian company that owns and operates a large automatic car wash facility near…
A: FLEXIBLE BUDGETA flexible budget is a budget that is prepared for different levels of activity or…
Q: The standard cost sheet for Skyline Company's most popular product shows 3 pounds of material at…
A: The variance is the difference between the standard and actual cost data. The variance can be…
Q: Problem Three Prepare journal entries for each of the following independent situations: A. Declared…
A: The Journal Entries are Prepared to Record the Transactions on Regular basis. The dividend is…
Q: Tharaldson Corporation makes a product with the following standard costs. Direct materials Direct…
A: The variance is the difference between the actual and standard production data. The variance can be…
Futura Company purchases the 61,000 starters that it installs in its standard line of farm tractors from a supplier for the price of $12.90 per unit. Due to a reduction in output, the company now has idle capacity that could be used to produce the starters rather than buying them from an outside supplier. However, the company’s chief engineer is opposed to making the starters because the production cost per unit is $14.10 as shown below:
Per Unit | Total | |
---|---|---|
Direct materials | $ 7.00 | |
Direct labor | 2.80 | |
Supervision | 1.90 | $ 115,900 |
1.20 | $ 73,200 | |
Variable manufacturing |
0.60 | |
Rent | 0.60 | $ 36,600 |
Total product cost | $ 14.10 | |
If Futura decides to make the starters, a supervisor would have to be hired (at a salary of $115,900) to oversee production. However, the company has sufficient idle tools and machinery such that no new equipment would have to be purchased. The rent charge above is based on space utilized in the plant. The total rent on the plant is $88,000 per period. Depreciation is due to obsolescence rather than wear and tear.
Required:
What is the financial advantage (disadvantage) of making the 61,000 starters instead of buying them from an outside supplier?
Step by step
Solved in 3 steps
- Jonfran Company manufactures three different models of paper shredders including the waste container, which serves as the base. While the shredder heads are different for all three models, the waste container is the same. The number of waste containers that Jonfran will need during the following years is estimated as follows: The equipment used to manufacture the waste container must be replaced because it is broken and cannot be repaired. The new equipment would have a purchase price of 945,000 with terms of 2/10, n/30; the companys policy is to take all purchase discounts. The freight on the equipment would be 11,000, and installation costs would total 22,900. The equipment would be purchased in December 20x4 and placed into service on January 1, 20x5. It would have a five-year economic life and would be treated as three-year property under MACRS. This equipment is expected to have a salvage value of 12,000 at the end of its economic life in 20x9. The new equipment would be more efficient than the old equipment, resulting in a 25 percent reduction in both direct materials and variable overhead. The savings in direct materials would result in an additional one-time decrease in working capital requirements of 2,500, resulting from a reduction in direct material inventories. This working capital reduction would be recognized at the time of equipment acquisition. The old equipment is fully depreciated and is not included in the fixed overhead. The old equipment from the plant can be sold for a salvage amount of 1,500. Rather than replace the equipment, one of Jonfrans production managers has suggested that the waste containers be purchased. One supplier has quoted a price of 27 per container. This price is 8 less than Jonfrans current manufacturing cost, which is as follows: Jonfran uses a plantwide fixed overhead rate in its operations. If the waste containers are purchased outside, the salary and benefits of one supervisor, included in fixed overhead at 45,000, would be eliminated. There would be no other changes in the other cash and noncash items included in fixed overhead except depreciation on the new equipment. Jonfran is subject to a 40 percent tax rate. Management assumes that all cash flows occur at the end of the year and uses a 12 percent after-tax discount rate. Required: 1. Prepare a schedule of cash flows for the make alternative. Calculate the NPV of the make alternative. 2. Prepare a schedule of cash flows for the buy alternative. Calculate the NPV of the buy alternative. 3. Which should Jonfran domake or buy the containers? What qualitative factors should be considered? (CMA adapted)Futura Company purchases the 64,000 starters that it installs in its standard line of farm tractors from a supplier for the price of $12.40 per unit. Due to a reduction in output, the company now has idle capacity that could be used to produce the starters rather than buying them from an outside supplier. However, the company’s chief engineer is opposed to making the starters because the production cost per unit is $13.60 as shown below: Per UnitTotalDirect materials$ 6.00 Direct labor3.20 Supervision1.90$ 121,600Depreciation1.30$ 83,200Variable manufacturing overhead0.70 Rent0.50$ 32,000Total product cost$ 13.60 If Futura decides to make the starters, a supervisor would have to be hired (at a salary of $121,600) to oversee production. However, the company has sufficient idle tools and machinery such that no new equipment would have to be purchased. The rent charge above is based on space utilized in the plant. The total rent on the plant is $83,000 per period. Depreciation is due to…Futura Company purchases the 67,000 starters that it installs in its standard line of farm tractors from a supplier for the price of $11.40 per unit. Due to a reduction in output, the company now has idle capacity that could be used to produce the starters rather than buying them from an outside supplier. However, the company's chief engineer is opposed to making the starters because the production cost per unit is $12.10 as shown below: Per Unit $ 5.00 3.00 Total Direct materials Direct labor Supervision Depreciation Variable manufacturing overhead Rent Total product cost 1.90 1.30 0.40 $ 127,300 $ 87,100 e.50 $ 12.10 $ 33,500 If Futura decides to make the starters, a supervisor would have to be hired (at a salary of $127,300) to oversee production. However, the company has sufficient idle tools and machinery such that no new equipment would have to be purchased. The rent charge above is based on space utilized in the plant. The total rent on the plant is $84,000 per perlod.…
- Futura Company purchases the 50,000 starters that it installs in its standard line of farm tractors from a supplier for the price of $11.70 per unit. Due to a reduction in output, the company now has idle capacity that could be used to produce the starters rather than buying them from an outside supplier. However, the company's chief engineer is opposed to making the starters because the production cost per unit is $11.90 as shown below: Per Unit $ 5.00 3.20 Total Direct materials Direct labor Supervision Depreciation Variable manufacturing overhead Rent 1.80 1.00 0.50 0.40 $ 90,000 $ 50,000 $ 20,000 Total production cost $11.90 If Futura decides to make the starters, a supervisor would have to be hired (at a salary of $90,000) to oversee production. However, the company has sufficient idle tools and machinery such that no new equipment would have to be purchased. The rent charge above is based on space utilized in the plant. The total rent on the plant is $90,000 per period.…Futura Company purchases the 70,000 starters that it installs in its standard line of farm tractors from a supplier for the price of $11.60 per unit. Due to a reduction in output, the company now has idle capacity that could be used to produce the starters rather than buying them from an outside supplier. However, the company's chief engineer is opposed to making the starters because the production cost per unit is $12.40 as shown below: Per Unit Total $ 5.00 Direct materials Direct labor 2.80 Supervision Depreciation Variable manufacturing overhead $ 133,000 $ 98,000 1.90 1.40 0.80 Rent 0.50 $ 35,000 Total product cost $ 12.40 If Futura decides to make the starters, a supervisor would have to be hired (at a salary of $133,000) to oversee production. However, the company has sufficient idle tools and machinery such that no new equipment would have to be purchased. The rent charge above is based on space utilized in the plant. The total rent on the plant is $81,000 per period.…Futura Company purchases the 66,000 starters that it installs in its standard line of farm tractors from a supplier for the price of $12.10 per unit. Due to a reduction in output, the company now has idle capacity that could be used to produce the starters rather than buying them from an outside supplier. However, the company's chief engineer is opposed to making the starters because the production cost per unit is $13.10 as shown below: Direct materials. Direct labor Supervision Depreciation Variable manufacturing overhead Rent Total product cost Per Unit $ 7.00 2.20 1.80 1.20 0.40 0.50 $ 13.10 Total $ 118,800 $ 79,200 $ 33,000 If Futura decides to make the starters, a supervisor would have to be hired (at a salary of $118,800) to oversee production. However, the company has sufficient idle tools and machinery such that no new equipment would have to be purchased. The rent charge above is based on space utilized in the plant and can't be avoided. The total rent on the plant is $81,000…
- Futura Company purchases the 74,000 starters that it installs in its standard line of farm tractors from a supplier for the price of $12.60 per unit. Due to a reduction in output, the company now has idle capacity that could be used to produce the starters rather than buying them from an outside supplier. However, the company's chief engineer is opposed to making the starters because the production cost per unit is $13.10 as shown below: Direct materials. Direct labor Supervision Depreciation Variable manufacturing overhead Rent Total product cost Per Unit $ 6.00 3.00 1.60 1.50 0.60 0.40 $ 13.10 Total $ 118,400 $ 111,000 $ 29,600 If Futura decides to make the starters, a supervisor would have to be hired (at a salary of $118,400) to oversee production. However, the company has sufficient idle tools and machinery such that no new equipment would have to be purchased. The rent charge above is based on space utilized in the plant. The total rent on the plant is $81,000 per period.…Futura Company purchases the 73,000 starters that it installs in its standard line of farm tractors from a supplier for the price of $11.00 per unit. Due to a reduction in output, the company now has idle capacity that could be used to produce the starters rather than buying them from an outside supplier. However, the company's chief engineer is opposed to making the starters because the production cost per unit is $11.90 as shown below: Per Unit Total Direct materials Direct labor Supervision Depreciation Variable manufacturing overhead 3.00 1.90 $138, 700 1.20 $ 87,600 0.50 0.30 $ 21,900 $11.90 Rent Total product cost If Futura decides to make the starters, a supervisor would have to be hired (at a salary of $138,700) to oversee production. However, the company has sufficient idle tools and machinery such that no new equipment would have to be purchased. The rent charge above is based on space utilized in the plant. The total rent on the plant is $80,000 per period. Depreciation is…Futura Company purchases 75,000 starters from a supplier at $11.10 per unit that it installs in farm tractors. Due to a reduction in output, the company now has enough idle capacity to produce the starters rather than buying them from the supplier. However, the company's chief engineer is opposed to making the starters because the production cost per unit is $12.20, as shown below: Direct materials Direct labor Supervision Depreciation Variable manufacturing overhead Rent Total product cost Per Unit $ 5.00 3.00 1.80 1.46 2.66 2.40 $ 12. 26 Total $ 135,000 $ 185,000 $ 30,000 If Futura decides to make the starters, a supervisor would be hired (at a salary of $135,000) to oversee production. However, the company has sufficient idle tools and machinery such that no new equipment would have to be purchased. The rent charge above is based on space utilized in the plant. The total rent on the plant is $83.000 per period. Required: What is the financial advantage (disadvantage) of making the…
- Futura Company purchases the 71,000 starters that it installs in its standard line of farm tractors from a supplier for the price of $13.00 per unit. Due to a reduction in output, the company now has idle capacity that could be used to produce the starters rather than buying them from an outside supplier. However, the company's chief engineer is opposed to making the starters because the production cost per unit is $14.20 as shown below: Direct materials Direct labor Supervision Depreciation Variable manufacturing overhead Rent Total product cost Per Unit Total $ 7.00 3.00 B 1.90 $ 134,900 1.40 $ 99,400 0.50 0.40 $ 28,400 $14.20 If Futura decides to make the starters, a supervisor would have to be hired (at a salary of $134,900) to oversee production. However, the company has sufficient idle tools and machinery such that no new equipment would have to be purchased. The rent charge above is based on space utilized in the plant. The total rent on the plant is $82,000 per period.…Futura Company purchases the 71,000 starters that it installs in its standard line of farm tractors from a supplier for the price of $12.70 per unit. Due to a reduction in output, the company now has idle capacity that could be used to produce the starters rather than buying them from an outside supplier. However, the company's chief engineer is opposed to making the starters because the production cost per unit is $12.90 as shown below: Direct materials Direct labor Supervision Depreciation Variable manufacturing overhead Rent Total product cost Per Unit $ 6.00 3.00 1.50 1.30 0.70 0.40 $ 12.90 Total If Futura decides to make the starters, a supervisor would have to be hired (at a salary of $106,500) to oversee production. However, the company has sufficient idle tools and machinery such that no new equipment would have to be purchased. The rent charge above is based on space utilized in the plant. The total rent on the plant is $84,000 per period. Depreciation is due to obsolescence…Futura Company purchases the 71,000 starters that it installs in its standard line of farm tractors from a supplier for the price of $12.70 per unit. Due to a reduction in output, the company now has idle capacity that could be used to produce the starters rather than buying them from an outside supplier. However, the company's chief engineer is opposed to making the starters because the production cost per unit is $12.90 as shown below: Direct materials Direct labor Supervision Depreciation Variable manufacturing overhead Rent Total product cost Per Unit $ 6.00 3.00 1.50 1.30 0.70 0.40 $ 12.90 Total $ 106,500 $ 92,300 $ 28,400 If Futura decides to make the starters, a supervisor would have to be hired (at a salary of $106,500) to oversee production. However, the company has sufficient idle tools and machinery such that no new equipment would have to be purchased. The rent charge above is based on space utilized in the plant. The total rent on the plant is $84,000 per period.…