Current-Control Inc. manufactures a variety of electrical switches. The company is currently manufacturing all of its own component parts. An outside supplier has offered to sell a switch to Current-Control for $32 per unit. To evaluate this offer, Current-Control has gathered the following information relating to its own cost of producing the switch internally: Direct materials Direct labour Variable manufacturing overhead Fixed manufacturing overhead, traceable Fixed manufacturing overhead, common, but allocated Total cost Per Unit 12,000 Units per Year $12 $144,000 10 120,000 3 36,000 8 96,000 16 192,000 $49 $588,000 *25% supervisory salaries; 75% depreciation of special equipment (no resale value). Required: 1-a. Assuming that the company has no alterative use for the facilities now being used to produce the switch, compute the total cost of making and buying the parts. Make Buy Total cost (12,000 units) 1-b. Should the outside supplier's offer be accepted? O Accept O Reject 2-a. Suppose that if the switches were purchased, Current-Control could use the freed capacity to launch a new product. The segment margin of the new product would be $78,000 per year. Compute the total cost of making and buying the parts Required: 1-a. Assuming that the company has no alternative use for the facilities now being used to produce the switch, compute the total cost of making and buying the parts. Make Buy Total cost (12,000 units) 1-b. Should the outside supplier's offer be accepted? O Accept O Reject 2-a. Suppose that if the switches were purchased, Current-Control could use the freed capacity to launch a new product. The segment margin of the new product would be $78,000 per year. Compute the total cost of making and buying the parts Make Buy Total cost (12.000 units) 2-b. Should Current-Control accept the offer to buy the switches from the outside supplier for $32 each? O Accept O Reject inces Cumberland County Senior Services is a non-profit organization devoted to providing essential services to seniors who live in their own homes within the Cumberland County area. Three services are provided for seniors-home nursing, Meals on Wheels, and housekeeping. In the home nursing program, nurses visit seniors on a regular basis to check on their general health and to perform tests ordered by their physicians. The Meals on Wheels program delivers a hot meal once a day to each senior enrolled in the program. The housekeeping service provides weekly housecleaning and maintenance services. Data on revenue and expenses for the past year follow: Revenues Variable expenses Contribution margin Fixed expenses: Depreciation Liability insurance Progras administrators' salaries General administrative overhead Total fixed expenses Operating income (loss) "Allocated on the basis of program revenues. Total Home Nursing Meals on Wheels $900,000 $260,000 $400,000 Housekeeping $240,000 490,000 120,000 210,000 160,000 410,000 140,000 190,000 80,000 68,000 8,000 40,000 20,000 42,000 20,000 7,000 15,000 115,000 40,000 38,000 37,000 180,000 52,000 80,000 48,000 405,000 120,000 165,000 $ 5,000 $ 20,000 $ 25,000 120,000 $(40,000) The head administrator of Cumberland County Senior Services, Judith Ewa, is concerned about the organization's finances and considers the operating income of $5,000 last year to be razor-thin. (Last year's results were very similar to the results for previous years and are representative of what would be expected in the future.) She feels that the organization should be building its financial reserves at a more rapid rate in order to prepare for the next inevitable recession. After seeing the above report. Ewa asked for more information about the financial advisability of discontinuing the housekeeping program The depreciation in the housekeeping category is for a small van that is used to carry the housekeepers and their equipment from job to job. If the program were discontinued, the van would be donated to a charitable organization. Depreciation charges assume zero salvage value. None of the general administrative overhead would be avoided if the housekeeping program were dropped, but the liability insurance and the salary of the program administrator would be avoided. Required: 1-a. Compute the change in net operating income for the company as a whole if housekeeping program be discontinued net operating income by of the general administrative overhead would be avoided if the housekeeping program were dropped, but the liability insurance and the salary of the program administrator would be avoided. Required: 1-a. Compute the change in net operating income for the company as a whole if housekeeping program be discontinued. in net operating income by 1-b. Should the housekeeping program be discontinued? O Yes O NO 2. Would a segmented income statement format be more useful to management in assessing the long-run financial viability of the various services? O Yes O NO Due to a strike in the plant of one of its competitors, demand for the company's products far exceeds its capacity to produce Management is trying to determine which product(s) to concentrate on next week in filling its backlog of orders. The direct labour rate is $8 per hour, and only 3,000 hours of labour time are available each week. Required: 1. Compute the amount of contribution margin that will be obtained per hour of labour time spent on each product. (Round your Intermediate calculations to 1 decimal place.) A B Contribution margin per labour hour $ 125 10 2. Which orders would you recommend that the company work on next week-the orders for product A, product B, or product C? O Product A Product B O Product C 3. By paying overtime wages, more than 3,000 hours of direct labour time can be made available next week. Up to how much should the company be willing to pay per hour in overtime wages as long as there is unfilled demand for the three products? (Do not round Intermediate calculations.) Maximum amount per hour Required Information. [The following information applies to the questions displayed below.] Cane Company manufactures two products called Alpha and Beta that sell for $120 and $80, respectively. Each product uses only one type of raw material that costs $6 per pound. The company has the capacity to annually produce 100,000 units of each product. Its unit costs for each product at this level of activity are given below: Direct materials Direct labour Variable manufacturing overhead Traceable fixed manufacturing overhead Variable selling expenses Common fixed expenses Cost per unit Alpha Beta $30 $12 20 15 75 16 18 12 8 15 10 $100 $ 68 The company considers its traceable fixed manufacturing overhead to be avoidable, whereas its common fixed expenses are deemed unavoidable and have been allocated to products based on sales dollars. 7. Assume that Cane normally produces and sells 40,000 Betas per year. If Cane discontinues the Beta product line, how much will profits increase or decrease? Answer is complete but not entirely correct. Profit $ decreases by 1,800,000 Required Information. [The following information applies to the questions displayed below] Cane Company manufactures two products called Alpha and Beta that sell for $120 and $80, respectively. Each product uses only one type of raw material that costs $6 per pound. The company has the capacity to annually produce 100,000 units of each product. Its unit costs for each product at this level of activity are given below. Direct materials Direct labour Variable manufacturing overhead Traceable fixed manufacturing overhead Variable selling expenses Common Fixed expenses Cost per unit Alpha $ 30 Beta $12 15 75 16 18 12 15 10 $100 $68 The company considers its traceable fixed manufacturing overhead to be avoidable, whereas its common fixed expenses are deemed unavoidable and have been allocated to products based on sales dollars 5. Assume that Cane expects to produce and sell 95,000 Alphas during the current year. One of Cane's sales representatives has found a new customer that is willing to buy 10,000 additional Alphas for a price of $80 per unit. If Cane accepts the customer's offer, it will decrease Alpha sales to regular customers by 5,000 units a. Calculate the incremental net operating income if the order is accepted? (Loss amount should be Indicated with a minus sign.) Answer is complete but not entirely correct. Incremental net operating income $ 145.000 Required Information [The following information applies to the questions displayed below] Cane Company manufactures two products called Alpha and Beta that sell for $120 and $80, respectively. Each product uses only one type of raw material that costs $6 per pound. The company has the capacity to annually produce 100,000 units of each product. Its unit costs for each product at this level of activity are given below. Direct materials Direct labour Variable manufacturing overhead Traceable fixed manufacturing overhead Variable selling expenses Common fixed expenses Cost per unit Alpha $ 30 Beta $ 12 20 7 5 16 18 12 8 15 $100 10 $68 The company considers its traceable fixed manufacturing overhead to be avoidable, whereas its common fixed expenses are deemed unavoidable and have been allocated to products based on sales dollars. Required: 1. What is the total amount of traceable fixed manufacturing overhead for the Alpha product line and for the Beta product line? Traceable fixed manufacturing overhead Alpha Beta