Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Pottery Ranch Inc. has been manufacturing its own finials for its curtain rods. The company is currently operating at 100% of capacity, and variable manufacturing

Pottery Ranch Inc. has been manufacturing its own finials for its curtain rods. The company is currently operating at 100% of capacity, and variable manufacturing overhead is charged to production at the rate of 69% of direct labor cost. The direct materials and direct labor cost per unit to make a pair of finials are $3.89 and $5.00, respectively. Normal production is 26,600 curtain rods per year. A supplier offers to make a pair of finials at a price of $13.32 per unit. If Pottery Ranch accepts the suppliers offer, all variable manufacturing costs will be eliminated, but the $45,100 of fixed manufacturing overhead currently being charged to the finials will have to be absorbed by other products.image text in transcribed

Prepare an incremental analysis to decide if Pottery Ranch should buy the finials. (Round answers to O decimal places, e.g. 1250. Enter nega sign preceding the number e.g. -45 or parentheses e.g. (45).) Net Income Increase (Decrease) Make Buy Direct materials Direct labor Variable overhead costs Fixed manufacturing costs Purchase price Total annual cost Should Pottery Ranch buy the finials? ,Pottery Ranch should the finials. Would your answer be different in (b) if the productive capacity released by not making the finials could be used to produce income of $33,568? Y, income would by $

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image_2

Step: 3

blur-text-image_3

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Financial and Managerial Accounting

Authors: Jonathan E. Duchac, James M. Reeve, Carl S. Warren

11th Edition

9780538480901, 9781111525774, 538480890, 538480904, 1111525773, 978-0538480895

More Books

Students also viewed these Accounting questions