BUS 341 MANAGERIAL ACCOUNTING! HAN DOUT 4 Q1. Zorich Company assembles products from a group of interconnecting parts. Some of the parts are produced by the company and some are purchased from outside vendors. The vendor for Part 23X has just increased its price by 35 percent to $10 per unit for the first 5,000 units and $9 per additional unit ordered each year. The company uses 2,500 units of Part 23X each year. Should the company continue to purchase the part or should it begin making the part? Unit costs to make and sell the part are: Direct materials $3.50 Direct labor $1.75 Variable manufacturing overhead $4.25 Variable selling costs for the assembled product $3.75 Q2. Bixler Company has received a special order for 1,000 units of Product YTZ at a selling price of $20 per unit. This order is over and above normal production, and budgeted production and sales targets for the year have already been exceeded. Capacity exists to satisfy the special order. No selling costs will be incurred in connection with this order. Unit costs to manufacture and sell Product YTZ are as follows: Direct materials, $71.60; direct labor, $3.15; variable manufacturing overhead, $9.25; fixed manufacturing costs, $4.85; variable selling costs, $2.25; and fixed general and administrative costs, $6.15. Should Bixler Company accept the order? Q3. The Iron Refrigerator Company purchases and installs defrost clocks in its products. The clocks cost $144 per case and each case contains twelve clocks. The supplier recently gave advance notice that, effective in 30 days, the price will rise by 50 percent. The company has idle equipment that, with only a few minor changes, could be used to produce similar defrost clocks. Cost estimates have been prepared under the assumption that the company could make the product itself. Direct materials would cost $9.00 per clock. Direct labor would be 10 minutes per clock at a labor rate of $12.00 per hour. Variable manufacturing overhead would be $6.50 per clock. Fixed manufacturing overhead, which would be incurred under either alternative, would be $32,420 a year for depreciation and $234,000 a year for other costs. Production and usage are estimated at 75,000 clocks a year. (Assume that idle equipment cannot be used for any other purpose.) 1. Prepare an incremental analysis to determine whether the defrost clocks should be made within the company or purchased from the outside supplier at the higher price. 2. Compute the total unit cost to make one clock and to buy one clock aer the price hike. Q4. On March 26, Barca lndustries received a special order request for 150 ten-foot aluminum fishing boats. Operating on a scal year ending May 31, the division already has orders that will allow it to Page 6 of 13 produce at budget levels for the period. However, extra capacity exists that could be used to produce the additional 150 boats. The terms of the special order call for a selling price of $625 per boat and the customer will pay all shipping costs. No sales personnel were involved in soliciting the order. The ten-foot shing boat has the following cost estimates: direct materials, aluminum, two 4' X 8' sheets at $145 per sheet; direct labor, 14 hours at $14.50 per hour; variable manufacturing overhead, $5.75 per direct labor hour; xed manufacturing overhead, $4.50 per direct labor hour; variable selling expenses, $46.50 per boat; and variable shipping expenses, $57.50 per boat. Prepare an incremental analysis for management to use in deciding whether to accept or reject the special order. What decision should be made