The Houston Corporation manufactures filing cabinets in two operations: machining and finishing. It provides the following information: (Click the icon to view the department information.) Each cabinet sells for $95 and has direct material costs of $55 incurred at the start of the machining operation. Houston has no other variable costs. Houston can sell whatever output it produces. The following requirements refer only to the preceding data. There is no connection between the requirements. Read the requirements. ..... Requirement 1. Houston is considering using some modern jigs and tools in the finishing operation that would increase annual finishing output by 1,500 units. The annual cost of these jigs and tools is $30,000. Should Houston acquire these tools? Show your calculations. Producing 1,500 more units will generate more contribution (throughput) margin and operating income because finishing is a bottleneck operation; machining is not . Select the formula, then enter the amounts to calculate the change in throughput contribution. Data Table Throughput contribution per unit $ 40 Should Houston acquire these tools? Relevant units 1,500 Change in throughput = $ contribution 60,000 The increase Therefore, Houston should in throughput contribution margin is implement the new design. greater than the incremental costs by $ 30,000 Requirement 2. The production manager of the Machining Department has submitted a proposal to do faster setups that would increase the annual capacity of the Machining Department by 12 calculations. Machining Annual capacity Annual production Finishing 130,000 units 105,000 units 105,000 units 105,000 units Fixed operating costs (excluding direct materials) Fixed operating costs per unit produced ($420,000 +105,000; $105,000 + 105,000) $420,000 $105,000 $4 per unit $1 per unit Print Done Machining is not a bottleneck operation; finishing is. Increasing its capacity further will not increase contribution (throughput) margin. Houston should not implement the change to increase Requirement 3. An outside contractor offers to do the finishing operation for 9,000 units at $2 per unit, double the $1 per unit that it costs Houston to do the finishing in-house. Should Houston accept the subcontractor's offer? Show your calculations. Finishing is a bottleneck operation; machining is not. Select the formula you will use to calculate the change in throughput contribution. Then, enter the amounts in the formula and calculate the change in throughput contribution. Change in throughput Relevant units Throughput contribution per unit = EA 9,000 40 = $ contribution 360,000 Houston should increase in throughput contribution is 342,000 contract with an outside contractor to do 9,000 units of finishing at $2 per unit because the greater than incremental costs by $ Requirement 4. The Hamilton Corporation offers to machine 5,200 units at $2 per unit, half the $4 per unit that it costs Houston to do the machining in-house. Should Houston accept Hamilton's offer? Show your calculations. Operating costs in the Machining Department of $420,000, or $4 per unit, are fixed costs. Houston will not The Houston Corporation manufactures filing cabinets in two operations: machining and finishing. It provides the following information: (Click the icon to view the department information.) Each cabinet sells for $95 and has direct material costs of $55 incurred at the start of the machining operation. Houston has no other variable costs. Houston can sell whatever output it produces. The following requirements refer only to the preceding data. There is no connection between the requirements. Read the requirements. Select the formula, men enter the amounts to Calculate the change in roughput ComputiII. ..... Requirements Throughput contribution per unit $ 40 Relevant units 1,500 = Change in throughput contribution 60,000 1. Should Houston acquire these tools? 2. The increase Therefore, Houston should in throughput contribution margin is implement the new design. greater than the incremental costs by $ 30,000 Houston is considering using some modern jigs and tools in the finishing operation that would increase annual finishing output by 1,500 units. The annual cost of these jigs and tools is $30,000. Should Houston acquire these tools? Show your calculations. The production manager of the Machining Department has submitted a proposal to do faster setups that would increase the annual capacity of the Machining Department by 12,500 units and would cost $26,000 per year. Should Houston implement the change? Show your calculations. 3. Requirement 2. The production manager of the Machining Department has submitted a proposal to do faster setups that would increase the annual capacity of the Machining Department by 12,500 ur calculations. An outside contractor offers to do the finishing operation for 9,000 units at $2 per unit, double the $1 per unit that it costs Houston to do the finishing in-house. Should Houston accept the subcontractor's offer? Show your calculations. Machining is not a bottleneck operation; finishing is. Increasing its capacity further will not increase contribution (throughput) margin. Houston should not implement the change to increase produ Requirement 3. An outside contractor offers to do the finishing operation for 9,000 units at $2 per unit, double the $1 per unit that it costs Houston to do the finishing in-house. Should Houston accept 1 Finishing is a bottleneck operation; machining is not. Select the formula you will use to calculate the change in throughput contribution. Then, enter the amounts in the formula and calculate the change in throughput contribution. 4. 5. 6. The Hamilton Corporation offers to machine 5,200 units at $2 per unit, half the $4 per unit that it costs Houston to do the machining in-house. Should Houston accept Hamilton's offer? Show your calculations. Houston produces 2,200 defective units at the machining operation. What is the cost to Houston of the defective items produced? Explain your answer briefly. Houston produces 2,200 defective units at the finishing operation. What is the cost to Houston of the defective items produced? Explain your answer briefly. contribution 360,000 Change in throughput Relevant units Throughput contribution per unit = 9,000 40 = Houston should increase in throughput contribution is 342,000 contract with an outside contractor to do 9,000 units of finishing at $2 per unit because the greater than incremental costs by $ Requirement 4. The Hamilton Corporation offers to machine 5,200 units at $2 per unit, half the $4 per unit that it costs Houston to do the machining in-house. Should Houston accept Hamilton's offer? Show your calculations. Operating costs in the Machining Department of $420,000, or $4 per unit, are fixed costs. Houston should not accept Hamilton's order. save any of these costs by subcontracting machining 5,200 units to Hamilton. Total costs will be greater by Houston will not $ 10,400 Requirement 5. Houston produces 2,200 defective units at the machining operation. What is the cost to Houston of the defective items produced? Explain your answer briefly. The cost of 2,200 defective units at the machining operation is Print Done