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The Kansas Corporation manufactures filing cabinets in two operations: machining and finishing. It provides the following information: (Click the icon to view the department information.) Each cabinet sells for $95 and has direct material costs of $50 incurred at the start of the machining operation. Kansas has no other variable costs. Kansas can sell whatever output it produces. The following requirements refer only to the preceding data. There is no connection between the requirements. Read the requirements. Data Table Machining 180,000 units 155,000 units Finishing 155,000 units Annual capacity Annual production 155,000 units $1,240,000 $775,000 Fixed operating costs (excluding direct materials) Fixed operating costs per unit produced ($1,240,000 = 155,000; $775,000 = 155,000) $8 per unit $5 per unit Requirement 1. Kansas is considering using some modern jigs and tools in the finishing operation that would increase annual finishing output by 1,450 units. The annual cost of these jigs and tools is $20,000. Should Kansas acquire these tools? Show your calculations. Producing 1,450 more units will generate contribution (throughput) margin and operating income because Select the formula, then enter the amounts to calculate the change in throughput contribution. Change in throughput contribution Should Kansas acquire these tools? The the incremental costs by in throughput contribution margin is implement the new design. Therefore, Kansas Requirement 2. The production manager of the Machining Department has submitted a proposal to do faster setups that would increase the annual capacity of the Machining Department by 9,500 units and would cost $26,000 per year. Should Kansas implement the change? Show your calculations. Increasing its capacity further increase contribution (throughput) margin. Kansas implement the change to increase production. Requirement 3. An outside contractor offers to do the finishing operation for 8,000 units at $10 per unit, double the $5 per unit that it costs Kansas to do the finishing in-house. Should Kansas accept the subcontractor's offer? Show your calculations. Select the formula you will use to calculate the change in throughput contribution. Then, enter the amounts in the formula and calculate the change in throughput contribution. Change in throughput = contribution II Kansas contract with an outside contractor to do 8,000 units of finishing at $10 per unit because the in throughput contribution is incremental costs by Requirement 4. The Henry Corporation offers to machine 6,200 units at $4 per unit, half the $8 per unit that it costs Kansas to do the machining in-house. Should Kansas accept Henry's offer? Show your calculations. Operating costs in the Machining Department of $1,240,000, or $8 per unit, are costs. Kansas save any of these costs by subcontracting machining 6,200 units to Henry. Total costs will be greater by Kansas accept Henry's order. Requirement 5. Kansas produces 2,200 defective units at the machining operation. What is the cost to Kansas of the defective items produced? Explain your answer briefly. The cost of 2,200 defective units at the machining operation is Because the Machining Department has a capacity of 180,000 units, it production to the Finishing Department. Therefore, there Machining Department. produce and transfer the annual opportunity cost of producing defective units in the Requirement 6. Kansas produces 2,200 defective units at the finishing operation. What is the cost to Kansas of the defective items produced? Explain your answer briefly. The cost of 2,200 defective units in the Finishing Department is because of the Because the Finishing Department a bottleneck operation, the cost of a defective unit is of contribution margin