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 $60 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 1,550 units. The annual cost of these jigs and tools is $30,000. Should Houston acquire these tools? Show your calculations. Producing 1,550 more units will generate contribution (throughput) margin and operating income because Data table Machining 200,000 units Finishing 170,000 units 170,000 units $1,870,000 Annual capacity Annual production Fixed operating costs (excluding direct materials) Fixed operating costs per unit produced ($2,380,000 = 170,000; $1,870,000 = 170,000) 170,000 units $2,380,000 $14 per unit $11 per unit I Requirements 1. 2. 3. Houston is considering using some modern jigs and tools in the finishing operation that would increase annual finishing output by 1,550 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 12,000 units and would cost $24,000 per year. Should Houston implement the change? Show your calculations. An outside contractor offers to do the finishing operation for 18,000 units at $33 per unit, triple the $11 per unit that it costs Houston to do the finishing in-house. Should Houston accept the subcontractor's offer? Show your calculations. The Halton Corporation offers to machine 6,400 units at $7 per unit, half the $14 per unit that it costs Houston to do the machining in-house. Should Houston accept Halton's offer? Show your calculations. Houston produces 1,600 defective units at the machining operation. What is the cost to Houston of the defective items produced? Explain your answer briefly. Houston produces 1,600 defective units at the finishing operation. What is the cost to Houston of the defective items produced? Explain your answer briefly. 4. 5. 6