Futura Company purchases the 73,000 starters that it installs in its standard line of farm tractors...
Fantastic news! We've Found the answer you've been seeking!
Question:
![image text in transcribed](https://s3.amazonaws.com/si.experts.images/answers/2024/05/6658b3ab001ff_1946658b3aaed6c4.jpg)
Transcribed Image Text:
Futura Company purchases the 73,000 starters that it installs in its standard line of farm tractors from a supplier for the price of $9.90 per unit. Due to a reduction in output, the company now has idle capacity that could be used to produce the starters rather than buying them from an outside supplier. However, the company's chief engineer is opposed to making the starters because the production cost per unit is $10.60 as shown below: Direct materials Direct labor Supervision Depreciation Variable manufacturing overhead Per Unit Total $ 4.00 2.50 1.90 $ 138,700 1.30 $ 94,900 0.40 0.50 $ 10.60 $ 36,500 Rent Total product cost If Futura decides to make the starters, a supervisor would have to be hired (at a salary of $138,700) to oversee production. However, the company has sufficient idle tools and machinery such that no new equipment would have to be purchased. The rent charge above is based on space utilized in the plant. The total rent on the plant is $83,000 per period. Depreciation is due to obsolescence rather than wear and tear. Required: What is the financial advantage (disadvantage) of making the 73,000 starters instead of buying them from an outside supplier? Financial advantage $ 43,800 Futura Company purchases the 73,000 starters that it installs in its standard line of farm tractors from a supplier for the price of $9.90 per unit. Due to a reduction in output, the company now has idle capacity that could be used to produce the starters rather than buying them from an outside supplier. However, the company's chief engineer is opposed to making the starters because the production cost per unit is $10.60 as shown below: Direct materials Direct labor Supervision Depreciation Variable manufacturing overhead Per Unit Total $ 4.00 2.50 1.90 $ 138,700 1.30 $ 94,900 0.40 0.50 $ 10.60 $ 36,500 Rent Total product cost If Futura decides to make the starters, a supervisor would have to be hired (at a salary of $138,700) to oversee production. However, the company has sufficient idle tools and machinery such that no new equipment would have to be purchased. The rent charge above is based on space utilized in the plant. The total rent on the plant is $83,000 per period. Depreciation is due to obsolescence rather than wear and tear. Required: What is the financial advantage (disadvantage) of making the 73,000 starters instead of buying them from an outside supplier? Financial advantage $ 43,800
Expert Answer:
Posted Date:
Students also viewed these accounting questions
-
An incompressible flow field has the cylinder components = Cr, z = K (R2 r2), r = 0, where C and K are constants and r R, z L. Does this flow satisfy continuity? What might it represent physically?
-
Baer Inc. has been manufacturing its own shades for its table lamps. The company is currently operating at 100% of capacity, and variable manufacturing overhead is charged to production at the rate...
-
Presented below are long-term liability items for Molini Company at December 31, 2010. Prepare the long-term liabilities section of the balance sheet for Molini Company. Bonds payable, due 2012 ......
-
20. The reference angle of 292 is A. 32 B. 22 C. 58 D. 68
-
What is the relationship between the margin of safety and the break-even point? A. The margin of safety shows the range that the breakeven point can move and still breakeven. O B. There is no...
-
At the firm, weve got a new way of looking at tax issues. Its called risk management, and, in your case, John, it means that we can be more aggressive than in the past. In the past, when there was an...
-
For each of the companies listed as follows, identify whether its competitive strategy is: a. innovative product/service design b. high-quality products and services c. low-cost production. i. Apple...
-
A grocery store makes pricing decisions based on product cost. All other costs to operate the store are fixed at \($800,000\) per year. The average cost of inventory at the store is \($1million.\)...
-
Why are we more concerned now than our parents were about fair treatment of employees?
-
In the United States, no universal health-care system, comparable to those in Canada, the United Kingdom and Europe, exists. US businesses often provide health insurance for their employees, but have...
-
The City - part of the government unit has provided the following information for the financial year ended 31 st March 2019.The unit has signed many contracts and placed order for supplies and...
-
____________ interfere(s) with open communication in most workplaces. (a) Status effects (b) The mum effect (c) Organizational ecology (d) Nonverbal communication
-
Among the rules for active listening is ____________. (a) remain silent and communicate only nonverbally (b) confront emotions (c) dont let feelings become part of the process (d) reflect back what...
-
If someone is interested in proxemics as a means of improving communication with others, that person would likely pay a lot of attention to his or her ____________. (a) office layout (b) status (c)...
![Mobile App Logo](https://dsd5zvtm8ll6.cloudfront.net/includes/images/mobile/finalLogo.png)
Study smarter with the SolutionInn App