202 Chapter 11 Homework Solutions

202 Chapter 11 Homework Solutions - Brief Exercise 11-3 (20...

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Brief Exercise 11-3  (20 minutes) The target production level is 40,000 starters per period, as shown by  the relations between per-unit and total fixed costs. “Cost”  Per Differential  Costs Unit Make Buy Explanation Direct materials. ........ $3.10 $3.10 Can be avoided by buying Direct labor. ............... 2.70 2.70 Can be avoided by buying Variable  manufacturing  overhead. ............... 0.60 0.60 Can be avoided by buying Supervision. .............. 1.50 1.50 Can be avoided by buying Depreciation 1.00 Sunk Cost Rent. ......................... 0.30 Allocated Cost Outside purchase  price. ......................                             $8.40 Total cost. .................. $9.20 $7.90 $8.40 The company should make the starters, rather than continuing to  buy from the outside supplier. Making the starters will result in a  $0.50 per starter cost savings, or a total savings of $20,000 per  period: $0.50 per starter × 40,000 starters = $20,000
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Exercise 11-10  (30 minutes) Only the incremental costs and benefits are relevant. In particular,  only the variable manufacturing overhead and the cost of the special  tool are relevant overhead costs in this situation. The other  manufacturing overhead costs are fixed and are not affected by the  decision.  Per Unit Total  for 20  Bracelets Incremental revenue. .............................. $169.95 $3,399.00 Incremental costs: Variable costs: Direct materials. ................................ $ 84.00 1,680.00 Direct labor. ....................................... 45.00 900.00 Variable manufacturing overhead. .... 4.00 80.00 Special filigree. ..................................      2.00      40.00 Total variable cost. ............................... $135.00 2,700.00 Fixed costs: Purchase of special tool. ...................     250.00 Total incremental cost. ...........................  2,950.00 Incremental net operating income. ......... $  449.00 Even though the price for the special order is below the company's 
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202 Chapter 11 Homework Solutions - Brief Exercise 11-3 (20...

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