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Gigs electronics manufactures a subassembly for its main product. The costs per unit are as follows: Direct materials $44.00 Direct labour 30.00 Variable overhead 27.00

Gigs electronics manufactures a subassembly for its main product. The costs per unit are

as follows:

Direct materials $44.00

Direct labour 30.00

Variable overhead 27.00

Fixed overhead 34.00

Total $135.00

Justin's Technologies has contacted Gigs electronics with an offer to sell 7,500 of the

subassemblies for $120.00 each. Gigs Electronics will eliminate $50,000 of fixed overhead

if it accepts the proposal.

Question:

Should Gigs Electronics make or buy the subassemblies? What is the difference between

the two alternatives?

Question 2

For 2020, Big Tech Corporation had sales of 225,000 units and production of 150,000 units. There was no beginning inventory. Other information for the year included:

Direct manufacturing labour $150,500

Variable manufacturing overhead 275,000

Direct materials 100,000

Variable selling expenses 110,000

Fixed administrative expenses 125,000

Fixed manufacturing overhead 210,000

Requirement:

Calculate the ending finished goods inventory under both absorption and variable

costing.

Question 3

Cristy's Bakery Products manufactures pastry boxes. Cristy's Bakery Products has a policy of adding a 25% markup to full costs and currently has excess capacity. The following information pertains to the company's normal operations per month:

Output units 5,000 pastry boxes

Machine-hours 3,000 hours

Direct manufacturing labour-hours 10,000 hours

Direct materials per unit $135

Direct manufacturing labour per hour $25

Variable manufacturing overhead costs $410,000

Fixed manufacturing overhead costs $700,000

Product and process design costs $655,000

Marketing and distribution costs $880,000

Cristy's Bakery Products is approached by an overseas customer to fulfil a one-time only special order for 2,000 units. All cost relationships remain the same except for a one-time setup charge of $75,000. No additional design, marketing, or distribution costs will be incurred.

Requirement:

What is the minimum acceptable bid per unit on this one-time-only special order?

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