Q1: Masse Corporation uses part G18 in one of its products. The company's Accounting Department reports...

Question

Q1: Masse Corporation uses part G18 in one of its products. The company's Accounting Department reports the following costs of producing the 16,000 units of the part that are needed every year. Per Unit Direct materials..... $2.90 Direct labor $3.90 Variable overhead. $6.70 Supervisor's salary ................. $7.20 Depreciation of special equipment........ $8.30 Allocated general overhead. $5.40 An outside supplier has offered to make the part and sell it to the company for $28.00 each. If this offer is accepted, the supervisor's salary and all of the variable costs, including direct labor, can be avoided. The special equipment used to make the part was purchased many years ago and has no salvage value or other use. The allocated general overhead represents fixed costs of the entire company. If the outside supplier's offer were accepted, only $22,000 of these allocated general overhead costs would be avoided. In addition, the space used to produce part G18 could be used to make more of one of the company's other products, generating an additional segment margin of $22,000 per year for that product. Required: Which alternative should the company choose? Q2: Part E43 is used in one of Ran Corporation's products. The company's Accounting Department reports the following costs of producing the 12.000 units of the part that are needed every year. Per Unit Direct materials..... $4.50 Direct labor.......... $1.20 Variable overhead........... $2.70 Supervisor's salary ........ $3.00 Depreciation of special equipment....... Allocated general overhead... $1.80 An outside supplier has offered to make the part and sell it to the company for $14.70 each. If this offer is accepted, the supervisor's salary and all of the variable costs, including direct labor, can be avoided. The special equipment used to make the part was purchased many years ago and has no salvage value or other use. The allocated general overhead represents fixed costs of the entire company. If the outside supplier's offer were accepted, only $5,000 of these allocated general overhead costs would be avoided. $2.30 Required: b. Which alternative should the company choose? Q3. The management of Therriault Corporation is considering dropping product U51Y. Data from the company's accounting system appear below: Sales....... $980,000 Variable expenses............... $568,000 Fixed manufacturing expenses .... $314,000 Fixed selling and administrative expenses....... $196,000 All fixed expenses of the company are fully allocated to products in the company's accounting system. Further investigation has revealed that $280,000 of the fixed manufacturing expenses and $140,000 of the fixed selling and administrative expenses are avoidable if product U51Y is discontinued. Required: What would be the effect on the company's overall net operating income if product U51Y were dropped? Should the product be dropped? Show your work! Q4. Nutall Corporation is considering dropping product N28X. Data from the company's accounting system appear below: Sales. $730,000 Variable expenses .......... $336,000 Fixed manufacturing expenses ......... $256,000 Fixed selling and administrative expenses........ $204,000 All fixed expenses of the company are fully allocated to products in the company's accounting system. Further investigation has revealed that $199,000 of the fixed manufacturing expenses and $114,000 of the fixed selling and administrative expenses are avoidable if product N28X is discontinued. Required: a. According to the company's accounting system, what is the net operating income earned by product N28X? Show your work! b. What would be the effect on the company's overall net operating income of dropping product N28X? Should the product be dropped? Show your work!

 · Answer

Q1.

	Make	Buy
Direct materials	$46400	$0
Direct labour	$62400	$0
Variable overhead	$107200	$0
Supervisor's salary	$115200	$0
Depreciation of special equipment	$36800	$0
Allocated general overhead	$86400	$64400
Purchase price	$0	$448000
Opportunity cost	$22000	$0
Total cost	$476400	$512400
Difference in costs		$36000
Make or buy		Make

The company should make the product.

Q2.

	Make	Buy
Direct materials	$54000	$0
Direct labour	$14400	$0
Variable overhead	$32400	$0
Supervisor's salary	$36000	$0
Depreciation on special equipment	$27600	$0
Allocated general overhead	$21600	$16600
Purchase price	$0	$176400
Total cost	$186000	$193000
Difference in costs		$7000
Make or buy		Make

The company should make the product.

Q3.

	Keep U51Y	Drop U51Y
Sales	$980000	$0
Variable expenses	($568000)	$0
Fixed manufacturing expenses	($314000)	($34000)
Fixed selling and administrative expenses	($196000)	($56000)
Net operating income/(loss)	($98000)	($90000)

The net operating losses are less in case the company drops it. The product should be dropped.

Q4.

a.

	Keep N28X
Sales	$730000
Variable expenses	($336000)
Fixed manufacturing expenses	($256000)
Fixed selling and administrative expenses	($204000)
Net operating income/(loss)	($66000)

b.

	Drop N28X
Sales	$0
Variable expenses	$0
Fixed manufacturing expenses	($57000)
Fixed selling and administrative expenses	($90000)
Net operating income/(loss)	($147000)

The net losses are less if the product is continued. Thus, company should not drop the product.

.

Q1: Masse Corporation uses part G18 in one of its products. The company's Accounting Department reports...

Question:

Answers

Similar Solved Questions

Return to que Required information The following information applies to the questions displayed below.) Fields Company...

2. (10 points) Consider the following solvolysis (S.1) reaction: cr 0 heat HCI (a) Draw the...

The following data for Romero Products Inc. are available: For the Year Ended December 31 Actual...

GOAL Calculate a time constant and relate it to current in an RL circuit. PROBLEM A...

On August 1, 2018, Limbaugh Communications issued $35 million of 10% nonconvertible bonds at 102. The...

Al with a specific heat of heat of 0.46 J/g°C? he cast inow. 2. The specific...

Budgeted direct labor-hours 1st Quarter 2nd Quarter 3rd Quarter 4th Quarter 8,200 8,300 8,600 8,000 The...

1) a) Draw a correctly labeled ASAD graph showing an economy with an output of $700,000....

Could someone check if I did this correctly? I also need help with f, g and...

The nurse has a patient that is admitted for sickle cell crisis and is completing the...

Question 2: &nb

Calculate the amount of interest if $3000 is invested at 6.25% from.november 30, 2014 to may...

Answer Only Please :) 1) Perfect competition is characterized by numerous firms. False True 2)Once a...

10 What are the portfolio weights for a portfolio that has 128 shares of Stock A...

Compare and contrast glycogen metabolism in the liver during fasting to glycogen metabolism in the skeletal...

Ex. 18-123-Long-term construction contracts (essay). In accounting for long-term construction contracts (those taking longer than one...