la lactors should management consider in making P20-2A The management of Shatner Manufacturing Company is trying to continue manufacturing a part or to buy it from an outside supplier CISCO, is a component of the company's finished product. The following information was collected from the accounting records a data for the year ending December 31, 2017 ompany is trying to decide whether side supplier. The part, called fors, ounting records and production 1. 8,000 units of CISCO were produced in the Machining Department. 2. Variable manufacturing costs applicable to the production of each CISCO unit were: direct materials $4.80, direct labor $4.30, indirect labor $0.43, utilities $0.40. 3. Fixed manufacturing costs applicable to the production of CISCO were: Cost Item Depreciation Property taxes Insurance Direct $2,100 500 900 $3,500 Allocated $ 900 200 600 $1,700 All variable manufacturing and direct fixed costs will be eliminated if CISCO is pur chased. Allocated costs will have to be absorbed by other production departments. 4. The lowest quotation for 8,000 CISCO units from a supplier is $80,000 5. IF CISCO units are purchased, freight and inspection costs would be $0.35 per unit and receiving costs totaling $1,300 per year would be incurred by the Machining Department. Instructions (a) Prepare an incremental analysis for CISCO. Your analysis should have columns for (a) NI (1) Make CISCO, (2) Buy CISCO, and (3) Net Income Increase/(Decrease). (b) Based on your analysis, what decision should management make? (c) Would the decision be different if Shatner Company has the opportunity to produce (c) NI $3,000 of net income with the facilities currently being used to manufacture CISCO2 Show computations. (d) What nonfinancial factors should management consider in making its decision? P20-3A Thompson Industrial Products Inc. (TIPI) is a diversified industrial cleaner pro- Deter cessing company. The company's Darpan plant produces two products: a table cleaner and sold a a floor cleaner from a common set of chemical inputs (CDG). Each week, 900,000 ounces 041 of chemical input are processed at a cost of $210,000 into 600,000 ounces of floor cleaner and 300.000 ounces of table cleaner. The floor cleaner has no market value until it is con verted into a polish with the trade name Floor Shine. The additional processing costs for this conversion amount to $240,000 Floor Shine sells at $20 per 30-ounce bottle. The table cleaner can be sold for 12 25-ounce bottle. However, the table cleaner can be converted into two other products adding 300,000 ounces of another compound (TCP) to the 300,000 ounces of table cleaner This joint process will yield 300,000 ounces each of table stain remover (TSR) and table polish (TP). The additional processing costs for this process amount to $100.000. Reh table products can be sold for $14 per 25-ounce bottle. The company decided not to process the table cleaner into TSR and TP based on following analysis. Process Further Table Stain Remover (TSR) 300,000 $168,000 Total Table Cleaner 300,000 $204,000 Production in ounces Revenues Costs: Table Polish (TP) 300,000 $168,000 $336,000 70.000 52.500 52 500