1) Jupiter Computer Company has been purchasing carrying cases for its portable computers at a purchase price of $70 per unit. The company, which is currently operating below full capacity, charges factory overhead to production at the rate of 40% of direct labor cost. The fully absorbed unit costs to produce comparable carrying cases are expected to be as follows:

Direct material $45

Direct labor 20

Factory overhead(40% of direct labor) 8

Total cost per unit $73

If Jupiter Computer Company manufactures the carrying cases, fixed factory overhead costs will not increase and variable factory overhead costs associated with the cases are expected to be 15% of the direct labor costs.

a) What is the extra variable factory overhead costs stated as a percentage of direct labor costs?

b) What is the extra variable factory overhead costs per unit in dollars and cents to make one case ourselves?

c) What is the total variable costs per unit in dollars and cents to make one case ourselves

d) The company should make the cases themselves if they want to save money. How much per unit can the firm save if they make the cases themselves?

2) Eclipse Construction Company is considering selling excess machinery with a book value of $280,000 (original cost of $400,000 less accumulated depreciation of $120,000) for $221,000, less a 5% brokerage commission. Alternatively, the machinery can be leased for a total of $216,000 for five years, after which it is expected to have no residual value. During the period of the lease, Eclipse Construction Company's costs of repairs, insurance, and property tax expenses are expected to be $14,200.

a) How much in dollars and cents is the brokerage commission expense to our firm if we sell the machinery?

b) After the brokerage commission expense if the firm sells the excess machinery, how much will they net or clear?

c) How much will the firm net or clear if they continue to own the machinery, lease it for a total of $216,000 Rent income for the total five year period, and have to pay a total of $14,200 over the five year period for repairs and other ownership costs?

3)

a) What is the total yearly savings on expenses if the firm buys the new machine? Remember although the firm will lay off all labor and save $51,000 per year on direct labor, some of the other costs go up with the new machine?

b) What is the grand total of those yearly savings for the 5 years life of the new machine if the firm buys that new machine

Kim Kwon Digital Components Company assembles circuit boards by using a manually operated machine to insert electronic components. The original cost of the machine is $60,000, the accumulated depreciation is $24,000, its remaining useful life is five years, and its residual value is negligible. On May 4 of the current year, a proposal was made to replace the present manufacturing procedure with a fully automatic machine that has a purchase price of $180,000. The automatic machine has an estimated useful life of five years and no significant residual value. For use in evaluating the proposal, the accountant accumulated the following annual data on present and proposed operations: Present Proposed operations Operations Sales $205,000 $205,000 72,000 Direct materials 72,000 Direct labor 51,000 18,000 Power and maintenance 5,000 Taxes, insurance, etc. 4,000 1,500 Selling and administrative expenses 45,000 45,000 Total expenses $174,500 $139,000