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. Data Table 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 H 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. $ Throughput contribution per unit x 40 Relevant units 1,500 Change in throughput contribution 60,000 - Machining Annual capacity Annual production Fixed operating costs (excluding direct materials) Fixed operating costs per unit produced ($420,000 + 105,000; $105,000 + 105,000) Finishing 130,000 units 105,000 units 105,000 units 105,000 units $420,000 $105,000 $4 per unit $1 per unit Should Houston acquire these tools? The increase in throughput contribution margin is Therefore, Houston should 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 12,500 units and would cost $26,000 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 production. 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? Sho 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 = contribution 40 = Requirements Print Done 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. 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 units and would cost $26,000 per year. Should Houston implement the change? Show your calculations. 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. 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. 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. 6. 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.