EBOOK SPA Question 3 Not complete Marked out of 7.00 P Flag question Make or Buy Eastside Company incurs a total cost of $123,000 in producing 10,000 units of a component needed in the assembly of its major product. The component can be purchased from an outside supplier for $10 per unit. A related cost study indicates that the total cost of the component includes fixed costs equal to 50% of the variable costs involved. a. Should Eastside buy the component if it cannot otherwise use the released capacity? Present your answer in the form of differential analysis. Use negative sign represent a net disadvantage answer otherwise do not use negative signs with your answers. Cost from outside supplier Variable costs avoided by purchasing Net advantage (disadvantage) to purchase alternative b. What would be your answer to requirement (a) if the released capacity could be used in a project that would generate $45,000 of contribution margin? Use negative sign represent a net disadvantage answer; otherwise do not use negative signs with your answers. Cost from outside supplier $ 0 Variable costs avoided by purchasing Contribution margin generated by new project Net advantage (disadvantage) to purchase alternatives Dropping Unprofitable Department Thomas Corporation has four departments, all of which appear to be profitable except department 4. Operating data for 2019 are as follows: Total Departments 1-3 Department 4 Sales $962,000 $810,000 $152,000 Cost of sales 640,500 526,500 114,000 Gross profit $321,500 $283,500 $38,000 Direct expenses $144,000 $120,000 $24,000 Common expenses 127,000 106,000 21,000 Total expenses $271,000 $226,000 $45,000 Net income (Loss) $50,500 $57,500 $(7,000) Required a. Calculate the gross profit percentage for departments 1-3 combined and for department 4. Department 1-3 0 % Department 4 0 % b. What effect would elimination of department 4 have had on total firm net income? (Ignore the effect of income tax.) The firm's net income would be: $ 0 Sell or Process Further Jensen Manufacturing Company makes a partially completed assembly unit that it sells for $37 per unit. Normally, 43,000 units are sold each year. Variable unit cost data on the assembly are as follows: Direct material $10 Direct labor Variable manufacturing overhead 4 The company is now using only 70% of its normal capacity, it could fully use its normal capacity by processing the assembly further and selling it for $44 per unit. If the company does this, material and labor costs will each increase by $2 per unit and variable overhead will go up by $1 per unit. Fixed costs will increase from the current level of $160,000 to $225,000. Prepare an analysis showing whether Jensen should process the assemblies further. Use a negative sign with answer to only indicate a loss from processing assemblies further, otherwise do not use negative signs with your answers. Sell of Process Further Differential Analysis Differential revenue Differential costs Direct material Direct labor Variable overhead Fixed costs Additional income (loss) from processing further s