Question
3. Supler Corporation produces a part used in the manufacture of one of its products. The unit product cost is $22, computed as follows: Direct
3. Supler Corporation produces a part used in the manufacture of one of its products. The unit product cost is $22, computed as follows:
Direct materials | $ 7 |
---|---|
Direct labor | 8 |
Variable manufacturing overhead | 3 |
Fixed manufacturing overhead | 4 |
Unit product cost | $ 22 |
An outside supplier has offered to provide the annual requirement of 4,700 of the parts for only $15 each. The company estimates that 50% of the fixed manufacturing overhead cost above could be eliminated if the parts are purchased from the outside supplier. Assume that direct labor is an avoidable cost in this decision. Based on these data, the financial advantage (disadvantage) of purchasing the parts from the outside supplier would be:
4. Stinehelfer Beet Processors, Incorporated, processes sugar beets in batches. A batch of sugar beets costs $47 to buy from farmers and $21 to crush in the company's plant. Two intermediate products, beet fiber and beet juice, emerge from the crushing process. The beet fiber can be sold as is for $23 or processed further for $15 to make the end product industrial fiber that is sold for $35. The beet juice can be sold as is for $43 or processed further for $39 to make the end product refined sugar that is sold for $81. What is the financial advantage (disadvantage) for the company from processing the intermediate product beet juice into refined sugar rather than selling it as is?
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