Answered step by step
Verified Expert Solution
Question
1 Approved Answer
Dentech, Inc uses 10 units of part RM67 each month in the production of dentistry equipment. The cost of manufacturing one unit of RM67 is
Dentech, Inc uses 10 units of part RM67 each month in the production of dentistry equipment. The cost of manufacturing one unit of RM67 is the following: Direct material $3,000 Material handling (20% of DM cost) 600 Direct labor 24,000 MOH (150% of DL) 36,000 total manf costs $63,600 Material handling represents the direct variable costs of the receiving department that are applied to DM and purchased components on the basis of their cost. This is a separate charge in addition to manufacturing overhead. Dentech's annual manufacturing overhead budget is 1/3 variable and 2/3 fixed. Scott Supply, one of Dentech's reliable vendors, has offered to supply part RM67 at a unit price of $45,000. 1. If Dentech purchases the RM67 units from Scott, the capacity Dentech used to manufacture these parts would be idle. Should Dentech decide to purchase the parts from Scott, the unit cost of RM67 would increase (decrease) by what amount? 2. Assume Dentech is able to rent out all its idle capacity for $75,000 per month. If Dentech decides to purchase the 10 units from Scott Supply, Dentech's monthly cost for RM67 would increase (decrease) by what amount? 3. Assume that Dentech does not wish to commit to a rental agreement but could use its idle capacity to manufacture another product that would contribute $156,000 per month. If Dentech's management elects to manufacture RM67 in order to maintain quality control, what is the net amount of Dentech's cost from using the space to manufacture part RM67
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started