Question
In: Accounting
Chenango Industries uses 15 units of part JR63 each month in the production of radar equipment....
Chenango Industries uses 15 units of part JR63 each month in the production of radar equipment. The cost of manufacturing one unit of JR63 is the following:
| Direct material | $ | 4,500 | |
| Material handling (20% of direct-material cost) | 900 | ||
| Direct labor | 31,000 | ||
| Manufacturing overhead (150% of direct labor) | 46,500 | ||
| Total manufacturing cost | $ | 82,900 | |
Material handling represents the direct variable costs of the Receiving Department that are applied to direct materials and purchased components on the basis of their cost. This is a separate charge in addition to manufacturing overhead. Chenango Industries’ annual manufacturing overhead budget is one-third variable and two-thirds fixed. Scott Supply, one of Chenango Industries’ reliable vendors, has offered to supply part number JR63 at a unit price of $51,000.
Required:
- If Chenango Industries purchases the JR63 units from Scott, the capacity Chenango Industries used to manufacture these parts would be idle. Should Chenango Industries decide to purchase the parts from Scott, the unit cost of JR63 would increase (or decrease) by what amount?
- Assume Chenango Industries is able to rent out all its idle capacity for $81,000 per month. If Chenango Industries decides to purchase the 15 units from Scott Supply, Chenango’s monthly cost for JR63 would increase (or decrease) by what amount?
- Assume that Chenango Industries does not wish to commit to a rental agreement but could use its idle capacity to manufacture another product that would contribute $165,000 per month. If Chenango’s management elects to manufacture JR63 in order to maintain quality control, what is the net amount of Chenango’s cost from using the space to manufacture part JR63?
Solutions
Expert Solution
Here is your answer : )
| If Chenango Industries purchases the JR63 units from Scott, the capacity Chenango Industries used to manufacture these parts would be idle. Should Chenango Industries decide to purchase the parts from Scott, the unit cost of JR63 would increase (or decrease) by what amount? | |||
| Incremental cost if manufactured | |||
| Purchase price | 51000 | ||
| Material Handling Cost (20 % of purchased price) | 10200 | ||
| 61200 | |||
| Total Price | |||
| Incremental cost if manufactured | |||
| Direct material | 4500 | ||
| Material handling | 900 | ||
| Direct labour | 31000 | ||
| Variable overhead | 15500 | ||
| Total | 51900 | ||
| Increase in unit cost if purchased | 9300 | ||
| Assume Chenango Industries is able to rent out all its idle capacity for $81,000 per month. If Chenango Industries decides to purchase the 15 units from Scott Supply, Chenango’s monthly cost for JR63 would increase (or decrease) by what amount? | |||
| Increase in monthly cost ( 9300 * 15 ) | 139500 | ||
| Rent from idle space | -81000 | ||
| Increase in monthly costs | 58500 | ||
| Assume that Chenango Industries does not wish to commit to a rental agreement but could use its idle capacity to manufacture another product that would contribute $165,000 per month. If Chenango’s management elects to manufacture JR63 in order to maintain quality control, what is the net amount of Chenango’s cost from using the space to manufacture part JR63? | |||
| Revenue lost due to not manufacturing alternative product | 165000 | ||
| Savings in cost of acquiring JR63 | -139500 | ||
| Net cost using limited capacity to produce JR63 | 25500 | ||
Thanks for such wonderful question.
For further doubts if any please comment, Will be ready to help all time :D
I will be happy if you give me nice comment and credit for my sincere effort to answer your valuable question
Heartful thanks once again...!
ekkarill92 answered 1 year agoRelated Solutions
Chenango Industries uses 11 units of part JR63 each month in the production of radar equipment....
Chenango Industries uses 11 units of part JR63 each month in the
production of radar equipment. The cost of manufacturing one unit
of JR63 is the following:
Direct material
$
4,000
Material handling (20% of direct-material cost)
800
Direct labor
33,000
Manufacturing overhead (150% of direct labor)
49,500
Total manufacturing cost
$
87,300
Material handling represents the direct variable costs of the
Receiving Department that are applied to direct materials and
purchased components on the basis of their cost. This...
Dentech, Inc., uses 10 units of part RM67 each month in the production of dentistry equipment....
Dentech, Inc., uses 10 units of part RM67 each month in the
production of dentistry equipment. The cost of manufacturing one
unit of RM67 is the following
Direct material
$
3,500
Material handling
(20% of direct-material cost)
700
Direct labor
32,000
Manufacturing
overhead (150% of direct labor)
48,000
Total manufacturing cost
$
84,200
Material handling represents the
direct variable costs of the Receiving Department that are applied
to direct materials and purchased components on the basis of their
cost....
Dentech, Inc., uses 11 units of part RM67 each month in the production of dentistry equipment....
Dentech, Inc., uses 11 units of part RM67 each month in the
production of dentistry equipment. The cost of manufacturing one
unit of RM67 is the following:
Direct material
$
2,000
Material handling (20% of direct-material cost)
400
Direct labor
32,000
Manufacturing overhead (150% of direct labor)
48,000
Total manufacturing cost
$
82,400
Material handling represents the
direct variable costs of the Receiving Department that are applied
to direct materials and purchased components on the...
Dentech, Inc., uses 11 units of part RM67 each month in the production of dentistry equipment....
Dentech, Inc., uses 11 units of part RM67 each month in the
production of dentistry equipment. The cost of manufacturing one
unit of RM67 is the following:
Direct material
$
2,000
Material handling (20% of direct-material cost)
400
Direct labor
32,000
Manufacturing overhead (150% of direct labor)
48,000
Total manufacturing cost
$
82,400
Material handling represents the
direct variable costs of the Receiving Department that are applied
to direct materials and purchased components on the...
Every year Bridgeport Industries manufactures 6,200 units of part 231 for use in its production cycle....
Every year Bridgeport Industries manufactures 6,200 units of
part 231 for use in its production cycle. The per unit costs of
part 231 are as follows:
Direct materials
$ 5
Direct labor
12
Variable manufacturing overhead
6
Fixed manufacturing overhead
10
Total
$33
Flintrock, Inc., has offered to sell 6,200 units of part 231 to
Bridgeport for $34 per unit. If Bridgeport accepts Flintrock’s
offer, its freed-up facilities could be used to earn $12,800 in
contribution margin by manufacturing part...
Every year Novak Industries manufactures 7,400 units of part 231 for use in its production cycle....
Every year Novak Industries manufactures 7,400 units of part 231
for use in its production cycle. The per unit costs of part 231 are
as follows:
Direct materials
$ 3
Direct labor
9
Variable manufacturing overhead
7
Fixed manufacturing overhead
10
Total
$29
Flintrock, Inc., has offered to sell 7,400 units of part 231 to
Novak for $32 per unit. If Novak accepts Flintrock’s offer, its
freed-up facilities could be used to earn $12,900 in contribution
margin by manufacturing part...
Lindon Company uses 4,000 units of Part X each year as a component in the assembly...
Lindon Company uses 4,000 units of Part X each year as a
component in the assembly of one of its products. The company is
presently producing Part X internally at a total cost of $54,000 as
follows:
Direct Materials
$11,000
Direct Labor
13,000
Variable Manufacturing Overhead
10,000
Fixed Manufacturing Overhead
20,000
Total Costs
$54,000
An outside supplier has offered to provide Part X at a price of
$11.50 per unit. If Lindon Company stops producing the part
internally, one-fourth of...
Part b process costing Intrepid industries manufactures sterile parts used in medical equipment. The company uses...
Part b process costing
Intrepid industries manufactures sterile parts used in medical
equipment. The company uses the weighted-average process costing
method to account for production costs. It produces parts in three
different departments: Forming, Sterilization, and Assembling. The
following information was reported for the assembling department
for the month of June: The beginning wip for June was 250,000
units.
amount
Degree of completion
Prior department costs transferred in from the forming
$387,600
100%
Costs added by the sterilization department:
Direct...
A-Tech Company uses 36,000 circuit boards each year in its production of stereo units. The cost...
A-Tech Company uses 36,000 circuit boards each year in its
production of stereo units. The cost of placing an order is $15.
The cost of holding one unit of inventory for one year is $3.
Currently, A-Tech orders 3,000 circuit boards in each order.
1. Compute the annual ordering cost.
2. Compute the annual carrying cost.
3. Compute the cost of A-Tech's current
inventory policy.
4. Compute the economic order quantity.
5. Compute the ordering cost and the carrying
cost...
Bernard Company manufactures 20,000 units of part A8 each year for use on its production line....
Bernard Company manufactures 20,000 units of part A8 each year
for use on its production line. The cost per unit of A8 is as
follows: Direct materials $2.40 Direct manufacturing labor 3.50
Variable manufacturing overhead 1.60 Fixed manufacturing overhead
5.00 Total cost per part $12.50 An outside supplier has offered to
sell 20,000 units of part A8 each year to Bernard Company for
$14.25 per part. If Bernard Company accepts this offer, the
facilities now being used to manufacture part...
ADVERTISEMENT
ADVERTISEMENT
Latest Questions
- C++ C++ Write a definition for a structure type for records for CDs. The record contains...
- Research Question: Does the spatial ability differ by biological sex? (Use Data A) Null Hypothesis: Spatial...
- Write a method speedingTicket() that decides whether a driver should be given a ticket from a...
- Beasley Ball Bearings paid a $4 dividend last year. The dividend is expected to grow at...
- 7. In order to improve the network performance and security, ACLs is recommended. Please explain what...
- Noting that there has been an increasing interest in organic foodstuffs with increasing affluence, Mr Tommy...
- 1. the physical sites at which crossing over occurs are the.... A. chiasmata B. Centrioles C....
ADVERTISEMENT