Futura Company purchases 74,000 starters from a supplier at $13.20 per unit that it installs in...
Fantastic news! We've Found the answer you've been seeking!
Question:
Transcribed Image Text:
Futura Company purchases 74,000 starters from a supplier at $13.20 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 $14.30, as shown below: Direct materials Direct labor Supervision Depreciation Variable manufacturing overhead Rent Total product cost Per Unit Total $ 7.00 3.00 2.00 $ 148,000 1.20 $ 88,800 8.70 8.40 $ 14.30 $ 29,600 If Futura decides to make the starters, a supervisor would be hired (at a salary of $148,000) 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 $86,000 per period. Required: What is the financial advantage (disadvantage) of making the 74,000 starters instead of buying them from an outside supplier? Futura Company purchases 74,000 starters from a supplier at $13.20 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 $14.30, as shown below: Direct materials Direct labor Supervision Depreciation Variable manufacturing overhead Rent Total product cost Per Unit Total $ 7.00 3.00 2.00 $ 148,000 1.20 $ 88,800 8.70 8.40 $ 14.30 $ 29,600 If Futura decides to make the starters, a supervisor would be hired (at a salary of $148,000) 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 $86,000 per period. Required: What is the financial advantage (disadvantage) of making the 74,000 starters instead of buying them from an outside supplier?
Expert Answer:
Posted Date:
Students also viewed these accounting questions
-
During the end-of-period physical inventory count some of the inventory was not counted. This caused ending inventory to be understated (too low) by $18,000. If the company uses the periodic...
-
Gluon Incorporated is considering the purchase of a new high pressure glueball. It can purchase the glueball for $ 2 2 0 , 0 0 0 and sell its old low - pressure glueball, which is fully depreciated,...
-
Ellis owns depreciable residential rental real estate, which has accumulated depreciation (all from straight-line) of $45,000. If Ellis sells the property, there will be a $33,000 gain. The initial...
-
KEA10. LO 16.3 Use the following excerpts from Fruitcake Company's financial records to determine net cash flows from investing activities. Acquired new plant assets Collected interest on investment...
-
Explain the structure of a triangular reorganization? What advantages would a triangular reorganization provide the acquiring corporation?
-
The Medassist Pharmaceutical Company makes a pill intended for children susceptible to seizures. The pill is supposed to contain 20.0 mg of Phenobarbital. A random sample of 20 pills yielded the...
-
Suppose you purchase five call contracts on Macron Technology stock. The strike price is $50, and the premium is $2. If, at expiration, the stock is selling for $60 per share, what are your call...
-
In Problem 3- 27, Farm Grown, Inc. has reason to believe the probabilities may not be reliable due to changing conditions. If these probabilities are ignored, what decision would be made using the...
-
Use the grouped data formulas to find the indicated mean or standard deviation. The speeds of a random sample of 100 cars are recorded as they pass a highway checkpoint. The results are summarized in...
-
Which of the following statements best describes a section 338transaction? Multiple Choice A section 338 transaction is an election made by the buyer totreat a stock acquisition as an asset...
-
How much cash did the business spend during the month? 1. Purchased office supplies for $2,400 in cash. 2. Clients paid a total of $23,000 cash in fees. 3. Paid the current month's office rent of...
-
3. (a) (2 marks) Evaluate the limit lim x0 1 - cos(x) x Hint: Multiply both numerator and denominator by 1 + cos(x), then use the result known from class: lim sin(x) x0 = 1. (b) (2 marks) The...
-
One of the junior accountants from your auditing firm has reviewed your records and entries for inventory, direct costs, overhead accounts and cost of goods sold. They have found two entries that...
-
Tripoli Parts uses job order costing. On Job 4265, they manufactured 500 parts. Job costs, before inspection, totaled $5,000.At the inspection point, 50 parts were were slightly damaged. The damage...
-
1.Jim Heeb operates a magical restaurant called Shazam! In it, he features both excellent food and magic shows. The lounge is popular since that is where the magic is viewed. Help Jim first calculate...
-
Master Budget Case Cordon Ltd. is a company that manufactures and sells a single product, which they call a Bleu. For planning and control purposes they utilize a monthly master budget, which is...
-
Rosalie owns 50% of the outstanding stock of Salmon Corporation. In a qualifying stock redemption, Salmon distributes $80,000 to Rosalie in exchange for one-half of her shares, which have a basis of...
-
How can a profitable business fail? a Because it can't pay its bills b Because it has more current liabilities than current assets c Because it has a bank overdraft d Because it has too much cash
-
When adjusting an operating profit to calculate the 'cash flows from operating activities', an increase in inventories over the financial period would be: a Added to operating profit b Ignored c...
-
Cash has been described as: a The lifebuoy of the business b The lifeboat of the business c The lifeline of the business d The lifeblood of the business
Study smarter with the SolutionInn App