Test Bank for Managerial Accounting, Third Edition BRIEF EXERCISES Brief Exercise 108Temple, Inc. produces several models of clocks. An outside supplier has offered to produce the commercial clocks for Temple for $420 each. Temple needs 1,200 clocks annually. Temple has provided the following unit costs for its commercial clocks:Direct materials$ 100Direct labor120Variable overhead80Fixed overhead (40% avoidable) 150Prepare an incremental analysis which shows the effect of the make or buy decision. Brief Exercise 109Calc, Inc. owns a machine that produces baskets for the gift packages the company sells. The company uses 800 baskets in production each month. The costs of making one basket is $4 for direct materials, $3 for variable manufacturing overhead, $2 for direct labor and $5 for fixed manufacturing overhead. The unit cost is based on the monthly production of 800 baskets. The company determined that 30% of the fixed manufacturing overhead is avoidable. An outside supplier has offered to sell Calc the baskets for $12 each, and can supply all the units it needs. Prepare an incremental analysis to determine if Calc should buy the component from the supplier. 6-20
Incremental Analysis Brief Exercise 110Signa Corporation currently manufactures 3,000 staplers annually for its main product. The costs per stapler are as follows: Direct materials$ 3.00Direct labor8.00Variable overhead4.00Fixed overhead7.00Total$22.00Darsel Company has contacted Signa with an offer to sell it 3,000 staplers for $18.00 each. $5 of the fixed overhead per unit is unavoidable. Prepare an incremental analysis for the make or buy decision.
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