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28. (4 points) Skate Company produces blades for ice skates. Blades are produced and sold internally to the Hockey Division of Skate Company and
28. (4 points) Skate Company produces blades for ice skates. Blades are produced and sold internally to the Hockey Division of Skate Company and the remaining sales of blades are sold to external retailers. Skate Co.'s estimated sales and cost data for the current year are as follows: Revenue Variable costs Fixed costs Hockey Division $25,500 18,750 3,000 Gross margin Unit sales $ 3,800 17,000 External Retailers $ 68,000 33,000 11,500 $ 17,500 30,000 The Hockey Division has an opportunity to purchase 17,000 blades (of identical quality) from an outside supplier at a cost of $1.20 per unit. Skate Co. cannot sell any additional blades to external retailers. No fixed costs can be eliminated in the short run. If you are the manager of the Hockey Division and based solely on financial considerations, do you buy the blades internally from Skate Co. or from the outside vendor? Show calculations to support your answer. 29. (3 points) Plant overhead for ABC Corporation in $150,000 per year, a portion of which (20%) is attributable to inspection costs. Inspection costs charged to products based on the number of parts per unit. The plant produces 5,000 units per year, and unit has 20 parts. What is the ABC allocation rate for inspection costs?
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