Tharaldson Corporation makes a product with the following standard costs: Standard Quantity or Hours 5.9 ounces 0.4 hours 0.4 hours Standard Standard Price or Cost Per Rate Unit $ 2.00 per ounce $11.80 $10.00 per hour $ 4.00 $ 4.00 per hour $ 1.60 Direct materials Direct labor Variable overhead The company reported the following results concerning this product in June. Originally budgeted output Actual output Raw materials used in production Purchases of raw materials Actual direct labor-hours Actual cost of raw materials purchases Actual direct labor cost Actual variable overhead cost 3,700 units 3,300 units 21, 500 ounces 22,000 ounces 510 hours $ 42,400 $ 13,700 $ 3,850 The company applies variable overhead on the basis of direct labor-hours. The direct materials purchases variance is computed when the materials are purchased. The labor efficiency variance for June is: Mcfarlain Corporation is presently making part U98 that is used in one of its products. A total of 18,000 units of this part are produced and used every year. The company's Accounting Department reports the following costs of producing the part at this level of activity: Direct materials Direct labor Variable overhead Supervisor's salary Depreciation of special equipment Allocated general overhead Per Unit $4.70 $4.20 $1.70 $5.10 $5.10 $5.50 An outside supplier has offered to produce and sell the part to the company for $22.80 each. If this offer is accepted, the supervisor's salary and all of the variable costs, including direct labor, can be avoided. The special equipment used to make the part was purchased many years ago and has no salvage value or other use. The allocated general overhead represents fixed costs of the entire company, none of which would be avoided if the part were purchased instead of produced internally. In addition to the facts given above, assume that the space used to produce part 198 could be used to make more of one of the company's other products, generating an additional segment margin of $73,100 per year for that product. What would be the financial advantage (disadvantage) of buying part U98 from the outside supplier and using the freed space to make more of the other product? Multiple Choice ($54,700) O ($2,500) O $73,100 Caspion Corporation makes and sells a product called a Miniwarp. One Miniwarp requires 4.5 kilograms of the raw material Jurislon. Budgeted production of Miniwarps for the next five months is as follows: August September October November December 22,800 units 21,500 units 22,900 units 24,100 units 23, 800 units The company wants to maintain monthly ending inventories of Jurislon equal to 20% of the following month's production needs. On July 31, this requirement was not met since only 11,000 kilograms of Jurislon were on hand. The cost of Jurislon is $20 per kilogram. The company wants to prepare a Direct Materials Purchase Budget for the next five months. The total cost of Jurislon to be purchased in August is: Multiple Choice $1,869,200 $2,439,000 $2,052,000 $2,219,000
