Question

1. Southwestern Company needs 1,000 motors in its manufacture of automobiles. It can buy the motors from Jinx Motors for $1,250 each. Southwestern's plant can manufacture the motors for the following costs per unit: Direct materials   $ 500 Direct manufacturing labor   250 Variable manufacturing overhead   200 Fixed manufacturing overhead   350 Total   $1,300 If Southwestern buys the motors from Jinx, 70% of the fixed manufacturing overhead will not be avoided. Should the company make or buy the motors? Group of answer choices make and save $55,000 buy and save $105,000 buy and save $50,000 make and save $195,000

2. Pat, a pizzeria manager, replaced the convection oven just six months ago. Today, Turbo Ovens Manufacturing announced the availability of a new convection oven that cooks more quickly with lower operating expenses. Pat is considering the purchase of this faster, lower-operating cost convection oven to replace the existing one. Selected information about the two ovens is given below: Existing oven   New turbo oven Original cost   $ 60,000   $ 65,000 Accumulated depreciation   $ 5,000   ------ Current salvage value   $ 55,000   ------ Remaining life   5 years   5 years Annual operating expenses   $ 10,000   $ 7,500 Disposal value in 5 years   $ 0   $ 0 Should Pat buy the new oven or keep the existing one? Group of answer choices keep existing and save $ 5,000 now buy new and spend $1 2,500 less over 5 years keep existing and save $10,000 now buy new and spend $ 2,500 less over 5 years

3. Romeo and Juliet manufacture candlesticks. Each new employee takes 6 hours to make the first candlestick. He is paid $15 per hour. The manufacturing overhead charge per hour is $20. The brass material costs $130 per candlestick. What is the total time needed to build the new employee’s first 16 candlesticks using an 80% cumulative average-time learning curve model? (For an 80% cumulative average learning curve, b = -0.321923.) Group of answer choices $5,440 $3,456.26 39.3216 hours 94.8576 hours

Answer 1

The correct answer is the last option which is make and save $195,000.

Workings: