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Chenango Industries uses 12 units of part JR63 each month in the production of radar equipment. The cost of manufacturing one unit ofJR63 is the
Chenango Industries uses 12 units of part JR63 each month in the production of radar equipment. The cost of manufacturing one unit ofJR63 is the following: Direct material $ 4, 5% Material handling (26% of directmaterial cost) 906 Direct labor 34,608 Manufacturing overhead [150% of direct labor) 51,666 Total manufacturing cost $ 93,493 Material handling represents the direct variable costs ofthe Receiving Department that are applied to direct materials and purchased components on the basis oftheir cost. This is a separate charge in addition to manufacturing overhead. Chenango lndustries' annual manufacturing overhead budget is one-third variable and twothirds fixed. Scott Supply, one of Chenango lndustries' reliable vendors, has offered to supply part number JR63 at a unit price of $58,000. If Chenango Industries purchases the JR63 units from Scott, the capacity Chenango Industries used to manufacture these parts would be idle. Should Chenango Industries decide to purchase the parts from Scott, the unit cost of JR63 would increase (or decrease) by what amount? Increase by per unitAssume Chenango Industries is able to rent out all its idle capacity for $88,000 per month. If Chenango Industries decides to purchase the 12 units from Scott Supply, Chenango's monthly cost for JR63 would increase (or decrease) by what amount? Increase by per monthu u. ...................... l. Assume that Chenango Industries does not wish to commit to a rental agreement but could use its idle capacity to manufacture another product that would contribute $1?2,000 per month. If Chenango's management elects to manufacture JRB in order to maintain quality,t control, what is the net amount of Chenango's cost from using the space to manufacture part JRB'? Show less
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