Gelb Company currently manufactures 43,500 units per year of a key component for its manufacturing process. Variable costs are $6.25 per unit, fixed costs related to making this component are $83,000 per year, and allocated fixed costs are $79,500 per year. The allocated fixed costs are unavoidable whether the company makes or buys this component. The company is considering buying this component from a supplier for $3.90 per unit. Calculate the total incremental cost of making 43,500 units and buying 43,500 units. Should it continue to manufacture the component, or should it buy this component from the outside supplier? Complete this question by entering your answers in the tabs below. Costs to Make Costs to Buy Outside Supplier Calculate the total incremental cost of making 43,500 units. (Round "variable cost per unit" answers to 2 decimal places.) Incremental Costs to Make Relevant Amount per Unit Relevant Fixed Costs Total Relevant Costs Variable cost per unit Fixed manufacturing costs Total incremental cost to make $ 0 Costs to Make Costs to Buy > Complete this question by entering your answers in the tabs below. Costs to Make Costs to Buy Outside Supplier Calculate the total incremental cost of buying 43,500 units. (Round "purchase price per unit" answers to 2 decimal places.) Incremental Costs to Buy Relevant Relevant Amount per Fixed Costs Unit Purchase price per unit Total incremental cost to buy Total Relevant Costs Costs to Make Outside Supplier > Complete this question by entering your answers in the tabs below. Costs to Make Costs to Buy Outside Supplier Should it continue to manufacture the component, or should it buy this component from the outside supplier? Should Gelb make the part or purchase it from the outside supplier? Costs to Buy Outside Supplier Cobe Company has already manufactured 16,000 units of Product A at a cost of $25 per unit. The 16,000 units can be sold at this stage for $400,000. Alternatively, the units can be further processed at a $240,000 total additional cost and be converted into 5,900 units of Product B and 12,000 units of Product C. Per unit selling price for Product B is $103 and for Product C is $58. 1. Prepare an analysis that shows whether the 16,000 units of Product A should be processed further or not? Sell as is Process Further Sales Relevant costs: Total relevant costs Income (loss) Incremental net income (or loss) if processed further The company should ! Required information [The following information applies to the questions displayed below. Suresh Co. expects its five departments to yield the following income for next year. Total Dept. M $75,000 Dept. N $ 41,000 Dept. 0 $68,000 Dept. P $51,000 Dept. T $ 36,000 $271,000 Sales Expenses Avoidable Unavoidable Total expenses Net income (loss) 13,800 55,000 68,800 $ 6,200 41,200 17,400 58,600 $(17,600) 21,000 5,000 26,000 $42,000 18,000 42,000 60,000 $(9,000) 45,000 15,400 60,400 $(24,400) 139,000 134,800 273,800 $ (2,800) Recompute and prepare the departmental income statements (including a combined total column) for the company under each of the following separate scenarios. (1) Management eliminates departments with expected net losses. DEPARTMENTS WITH EXPECTED NET LOSSES ELIMINATED Dept. M Dept. N Dept. o Dept. P Dept. T Total Sales $ 0 Expenses: Avoidable 0 Unavoidable 0 Total expenses Net income (loss) $ 0 $ 0 $ 0 $ $ 0 $ 0 ! Required information [The following information applies to the questions displayed below.] Suresh Co. expects its five departments to yield the following income for next year. Dept. M $75,000 Dept. N $ 41,000 Dept. 0 $68,000 Dept. P $51,000 Dept. T $ 36,000 Total $271,000 Sales Expenses Avoidable Unavoidable Total expenses Net income (Loss) 13,800 55,000 68,800 $ 6,200 41,200 17,400 58,600 $(17,600) 21,000 5,000 26,000 $42,000 18,000 42,000 60,000 $(9,000) 45,000 15,400 60,400 $(24,400) 139,000 134,800 273,800 $ (2,800) Recompute and prepare the departmental income statements (including a combined total column) for the company under each of the following separate scenarios. (2) Management eliminates departments with sales dollars that are less than avoidable expenses. DEPARTMENTS WITH LESS SALES THAN AVOIDABLE EXPENSES ELIMINATED Dept. M Dept. N. Dept. o Dept. P Dept. T Total Sales $ 0 Expenses Avoidable 0 Unavoidable 0 Total expenses Net income (loss) $ 0 $ 0 $ 0 $ 0 $ 0 $ 0
