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1. 2. 3. 4. Coronado Industries incurs the following costs to produce 8500 units of a subcomponent: An outside supplier has offered to sell Coronado
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Coronado Industries incurs the following costs to produce 8500 units of a subcomponent: An outside supplier has offered to sell Coronado the subcomponent for $2.60 a unit. If Coronado could avoid $3000 of fixed overhead by accepting the offer, net income would increase (decrease) by $(8000).$(7100).$(8500).$14500. Marigold Corp. incurs the following costs to produce 9500 units of a subcomponent: An outside supplier has offered to sell Marigold the subcomponent for $2.35 a unit. No fixed costs are avoidable. If Marigold accepts the offer, it could use the production capacity to produce another product that would generate additional income of $3600. The increase (decrease) in net income from accepting the offer would be $(9625)$16825.$9625$(3600) Each of the following is a disadvantage of buying rather than making a component of a company's product except that profitable product lines may be dropped. the supplier may not deliver on time. quality control specifications may not be met. the outside supplier could increase prices significantly in the future. Cullumber Company purchases sails and produces sailboats. It currently produces 1,200 sailboats per year, operating at normal capacity, which is about 80% of full capacity. Cullumber purchases sails at $253 each, but the company is considering using the excess capacity to manufacture the sails instead. The manufacturing cost per sail would be $99 for direct materials, $85 for direct labor, and $90 for total manufacturing overhead. The $90 total manufacturing overhead includes $78,000 of annual fixed overhead that is allocated using normal capacity. The president of Cullumber has come to you for advice. "It would cost me $274 to make the sails," she says, "but only $253 to buy them. Should I continue buying them, or have I missed something?" Prepare a per unit analysis of the differential costs. (Enter negative amounts using either a negative sign preceding the number eg. 45 . or parentheses eg. (45).) Should Cullumber make or buy the sails 2.
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