Ahsan Company makes 60,000 units per year of a part it uses in the products it m

Question

Ahsan Company makes 60,000 units per year of a part it uses in the products it manufactures. The unit product cost of this part is computed as follows:

14.40    

$46.80    

  
An outside supplier has offered to sell the company all of these parts it needs for $63.70 a unit. If the company accepts this offer, the facilities now being used to make the part could be used to make more units of a product that is in high demand. The additional contribution margin on this other product would be $319,200 per year.   
If the part were purchased from the outside supplier, all of the direct labor cost of the part would be avoided. However, $4.10 of the fixed manufacturing overhead cost being applied to the part would continue even if the part were purchased from the outside supplier. This fixed manufacturing overhead cost would be applied to the company's remaining products.

How much of the unit product cost of $46.80 is relevant in the decision of whether to make or buy the part?

$63.70

$16.70

$32.40

$42.70

The Rodgers Company makes 29,000 units of a certain component each year for use in one of its products. The cost per unit for the component at this level of activity is as follows:

$7.50    

Rodgers has received an offer from an outside supplier who is willing to provide 29,000 units of this component each year at a price of $37.00 per component. Assume that direct labor is a variable cost. None of the fixed manufacturing overhead would be avoidable if this component were purchased from the outside supplier.
  
Assume that if the component is purchased from the outside supplier, $35,100 of annual fixed manufacturing overhead would be avoided and the facilities now being used to make the component would be rented to another company for $64,800 per year. If Rodgers chooses to buy the component from the outside supplier under these circumstances, then the impact on annual net operating income due to accepting the offer would be:

$12,900 decrease.

$12,900 increase.

$51,900 decrease.

$51,900 increase.

The Immanuel Company has just obtained a request for a special order of 6,700 jigs to be shipped at the end of the month at a selling price of $14 each. The company has a production capacity of 90,000 jigs per month with total fixed production costs of $144,000. At present, the company is selling 80,000 jigs per month through regular channels at a selling price of $25 each. For these regular sales, the cost for one jig is:
     

$4.50    

  
If the special order is accepted, Immanuel will not incur any selling expense; however, it will incur shipping costs of $0.30 per unit. Total fixed production cost would not be affected by this order.
  
Suppose that regular sales of jigs total 85,000 units per month. All other conditions remain the same. If Immanuel accepts the special order, the change in monthly net operating income will be (Do not round your intermediate calculations):

$48,910 increase

$21,450 decrease

$23,440 increase

$23,460 decrease

  Direct materials $12.10       Direct labor 16.70       Variable manufacturing overhead 3.60       Fixed manufacturing overhead

14.40    

  Unit product cost

$46.80    

Explanation / Answer

As per Chegg Guidelines we answer one question per post. I have answered more than 1 question. Kindly post remaining questions in separate post to get the best answers $42.70 Statement showing Calculation of Relevant Product Cost Particulars Amount Direct Materials                   12.10 Labour Cost                   16.70 Variable Manu Cost                     3.60 Fixed Manu Cost(14.40-4.10)                   10.30 Relevant product Cost                   42.70 $12,900 increase. Statement showing evaluation of proposal Particulars Make Buy Diff Direct Materials        266,800.00         266,800.00 Labour Cost        406,000.00         406,000.00 Variable Manu Cost        313,200.00         313,200.00 Fixed Manu Cost          35,100.00            35,100.00 Purchase Cost    1,073,000.00 (1,073,000.00) Oppurtunity Cost        (64,800.00)            64,800.00 Relevant Cost    1,021,100.00    1,008,200.00            12,900.00 Since cost will be less in Buy proposal income will be more in buy proposal

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