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1. 2. The Kitchen Art Corporation makes 3,000 spring-loaded tray to be used in the production of its toasters. The average cost per spring tray
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The Kitchen Art Corporation makes 3,000 spring-loaded tray to be used in the production of its toasters. The average cost per spring tray at this level of activity is: Variable Costs: Direct materials Direct labor Variable manufacturing overhead Fixed costs: Fixed manufacturing overhead $ 0.75 $12.00 $ 0.35 $ 2.20 An outside supplier recently began producing a comparable part that could be used in the toaster. The price offered to Kitchen Art Corporation for the spring tray is $16.95. None of the fixed manufacturing overhead cost could be eliminated if the spring trays are purchased. Also, if Kitchen Art Corporation decides not to make the spring trays, it could use the freed capacity to launch a new product. The segment margin of the new product would be $11,000. The financial advantage (disadvantage) for the company as a result of making the spring trays rather than buying them from the outside supplier would be: $(550) $6,050 $550 $(6,050) Two products, Product 1 and Product 2, emerge from a joint process. Product 1 has been allocated $30,000 of the total joint costs of $81,000. A total of 4,250 units of Product 1 are produced from the joint process. Product 1 can be sold at the split-off point for $9 per unit, or it can be processed further for an additional total cost of $22,375 and then sold for $15 per unit. If Product 1 is processed further and sold, what would be the financial advantage (disadvantage) for the company compared with selling it in its unprocessed form directly after the split-off point? $(4,500) $(33,125) $3,125 $32,375Step by Step Solution
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