TM Ltd. currently manufactures Part XMB, which is used in one of its products. At its...

TM Ltd. currently manufactures Part XMB, which is used in one of its products. At its production level of 2764 units, the unit product cost of Part XMB is as follows:

	Direct labour	$7
	Direct materials	5
	Manufacturing overhead (41% is variable)	19

A supplier, Tam Co., has offered to sell TM Ltd. 2764 units of Part XMB for $24 a unit. TM Ltd. has determined that if it purchases the part externally, all costs will be avoidable with the exception of three quarters of the fixed manufacturing overhead.

In determining whether to accept Tam Co.’s offer, what are the relevant costs to TM of manufacturing the parts internally (cost to make)?

Select one:

a. $46297

b. $54700

c. $77938

d. $62446

Expert Solution


Statement showing Relevant Costs to Make
Direct labour(2764*$7)	$ 19,348
Direct material(2764*$5)	$ 13,820
Variable manufacturing labor(2764$1941%)	$ 21,532
Fixed manufacturing labor(2764$1959%*25%)	$ 7,746
Relevant Costs to Make	$ 62,446

So Option D is answer

ekkarill92 answered 1 year ago

Younes Inc. manufactures industrial components. One of its products, which is used in the construction of...

Younes Inc. manufactures industrial components. One of its products, which is used in the construction of industrial air conditioners, is known as P06. Data concerning this product are given below: Per Unit Selling price $ 220 Direct materials $ 38 Direct labor $ 1 Variable manufacturing overhead $ 8 Fixed manufacturing overhead $ 16 Variable selling expense $ 4 Fixed selling and administrative expense $ 16 The above per unit data are based on annual production of 4,000 units of...

Schmidt Corporation produces a part that is used in themanufacture of one of its products....

Schmidt Corporation produces a part that is used in the manufacture of one of its products. The costs associated with the production of 10,000 units of this part are as follows: Direct materials $45,000 Direct labour 45,000 Variable factory overhead 30,000Fixed factory overhead 70,000 Total costs $190,000 Of the fixed factory overhead costs, $30,000 is not avoidable. 2. Phil Company has offered to sell 10,000 units of the same part to Schmidt Corporation for $13 per unit. Assuming there is...

Spahr Company produces a part that is used in the manufacture of one of its products....

Spahr Company produces a part that is used in the manufacture of one of its products. The unit manufacturing costs of this part, assuming a production level of 5,000 units, are as follows: Direct materials $2.00 Direct labour $4.00 Variable manufacturing overhead 4.00 Fixed manufacturing overhead $2.00 Total cost $12.00 The fixed overhead costs are unavoidable. Erickson Company has offered to sell 5,000 units of the same part to Spahr Company for $11 per unit. Assuming the company has no...

Spahr Company produces a part that is used in the manufacture of one of its products.

Spahr Company produces a part that is used in the manufacture of one of its products. The unit manufacturing costs of this part, assuming a production level of 5,000 units, are as follows: Direct materials $2.00 Direct labour $4.00 Variable manufacturing overhead 4.00 Fixed manufacturing overhead $2.00 Total cost $12.00 The fixed overhead costs are unavoidable. Erickson Company has offered to sell 5,000 units of the same part to Spahr Company for $11 per unit. Assuming the company...

Cruise Company produces a part that is used in the manufacture of one of its products.

Cruise Company produces a part that is used in the manufacture of one of its products. The unit manufacturing costs of this part, assuming a production level of 6,000 units, are as follows: Direct materials $4.00 Direct labour $4.00 Variable manufacturing overhead $3.00 Fixed manufacturing overhead $4.00 Total cost $15.00 The fixed overhead costs are unavoidable. 6. Assuming Cruise Company can purchase 6,000 units of the part from Suri Company for $13 each, and the facilities currently used to make...

Bunny Company produces a part that is used in the manufacture of one of its products....

Bunny Company produces a part that is used in the manufacture of one of its products. The costs associated with the production of 11,000 units of this part are as follows: Direct materials $25,000 Direct labor 34,000 Variable factory overhead 65,000 Fixed factory overhead 50,000 $174,000 Of the fixed factory overhead costs, $9,000 is avoidable. Required: a. Assuming there is no alternative use for the facilities, should Bunny Company take advantage of an offer from a supplier who is willing...

Landry's Inc. produces a part that is used in the manufacture of one of its products....

Landry's Inc. produces a part that is used in the manufacture of one of its products. The costs associated with the production of 10,000 units of this part are as follows: Direct materials $ 90,000 Direct labor 130,000 Variable factory overhead 60,000 Fixed factory overhead 140,000 Total costs $420,000 Of the fixed factory overhead costs, $60,000 is avoidable. Cooper Company has offered to sell 10,000 units of the same part to Landry's Inc...

Division L at Reiner Ltd. manufactures 17686 units of part #70, which it currently sells to...

Division L at Reiner Ltd. manufactures 17686 units of part #70, which it currently sells to outside customers. Selected data for part #70 are given below: Unit selling price to outside customers $90.81 Variable production cost per unit 57.70 Variable selling and administrative expense per unit 11.22 Total fixed production cost (based on a capacity of 19091 units per year) $380000 Division K at Reiner Ltd. currently purchases 7621 units of part #70 from an outside supplier at a price...

Part E14 is used by M Corporation to make one of its products. A total of...

Part E14 is used by M Corporation to make one of its products. A total of 16,500 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: Per Unit Direct materials $ 3.60 Direct labor $ 8.20 Variable manufacturing overhead $ 8.70 Supervisor's salary $ 4.10 Depreciation of special equipment $ 2.50 Allocated general overhead $ 7.70 An outside supplier has offered to...

Part A42 is used by Elgin Corporation to make one of its products. A total of...

Part A42 is used by Elgin Corporation to make one of its products. A total of 20,500 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: Per Unit Direct materials $8.40 Direct labor $9.80 Variable manufacturing overhead $6.40 Supervisor's salary $6.50 Depreciation of special equipment $8.90 Allocated general overhead $6.20 An outside supplier has offered to make the part and sell it...

Question