Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Solomon Chemical Company makes a variety of cosmetic products, one of which is a skin cream designed to reduce the signs of aging Solomon produces

image text in transcribed
image text in transcribed
image text in transcribed
image text in transcribed
Solomon Chemical Company makes a variety of cosmetic products, one of which is a skin cream designed to reduce the signs of aging Solomon produces a relatively small amount (17,000 units) of the cream and is considering the purchase of the product from an outside supplier for $5.60 each. If Solomon purchases from the outside supplier, it would continue to sell and distribute the cream under its own brand name. Solomon's accountant constructed the following profitability analysis Revenue (17,000 units $14.50) Unit-level materials costs (17,000 units $1.60) Unit-level labor costs (17,800 units $0.8e) Unit-level overhead costs (17,000 $0.20) Unit-level selling expenses (17,000 $0.30) Contribution margin Skin cream production supervisor's salary Allocated portion of facility-level costs Product-level advertising cost Contribution to company-wide incone $246,500 (27,200) (13,600) (3,400) (5,100) 197,200 (59,000) (13,400) (42,000) $ 82,800 Required 3. Identify the cost items relevant to the make-or-outsource decision b. What is the avoidable cost per unit if the outsourcing decision is taken? Should Solomon continue to make the product or buy it from the supplier? c. Suppose that Solomon is able to increase sales by 13,000 units (sales will increase to 30,000 units). Calculate the total avoidable costs. At this level of production, should Solomon make or buy the cream? Required A Required B Required C Identify the cost items relevant to the make-or-outsource decision. Total avoidable costs Required A Required B Required What is the avoidable cost per unit if the outsourcing decision is taken? Should Solomon continue to make the product or buy it from the supplier? (Round your answer to 2 decimal places.) Total avoidable costs Should Solomon continue to make the product or buy it from the supplier? per unit Required A Required B Required Suppose that Solomon is able to increase sales by 13,000 units (sales will increase to 30,000 units). Calculate the total avoidable costs. At this level of production, should Solomon make or buy the cream? Total avoidable costs At this level of production, should Solomon make or buy the cream?

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

Step: 3

blur-text-image

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

Payroll Accounting 2020

Authors: Jeanette Landin

6th Edition

1260247961, 9781260247961

More Books

Students also viewed these Accounting questions

Question

=+a) Compute the EV for each alternative product (decision).

Answered: 1 week ago

Question

What does the print perview option allow you to do

Answered: 1 week ago