Problem 20-2A The management of Shatner Manufacturing Company is trying to decid

Question

Problem 20-2A The management of Shatner Manufacturing Company is trying to decide whether to continue manufacturing a part or to buy it from an outside supplier. The part, called CISCO, is a component of the company's finished product. The following information was collected from the accounting records and production data for the year ending December 31, 2017 1. 8,100 units of CISCO were produced in the Machining Department. 2. Variable manufacturing costs applicable to the production of each CISCO unit were: direct materials $5.10, direct labor $4.89, indirect labor $0.42, utilities $0.35 3. Fixed manufacturing costs applicable to the production of CISCO were: Cost Item Direct Allocated Depreciation 1,900 $930 400 540 $3,270 $1,970 Property taxes 47 0 Insurance 900 All variable manufacturing and direct fixed costs will be eliminated if CISCO is purchased. Allocated costs will have to be absorbed by other production departments. 4. The lowest quotation for 8,100 CISCO units from a supplier is $87,328 5. If CISCO units are purchased, freight and inspection costs would be $0.38 per unit, and receiving costs totaling $1,290 per year would be incurred by the Machining Department (a) Prepare an incremental analysis for CISCO. (Enter negative amounts using either a negative sign preceding the number e.g. -45 or parentheses e.g. (45).) Net Income Increase Make CISCO Buy CISCO (Decrease) Direct material Direct labor Indirect labor Utilities Depredation Property taxes Insurance Purchase price Freight and inspection Receiving costs Total annual costs

Explanation / Answer

Make CISCO Buy CISCO Net Income Increase /(Decrease) Per Unit Cost Total Per Unit Cost Total Direct Material $5.10 $41,310.00 $41,310.00 Direct Labour $4.89 $39,609.00 $39,609.00 Indirect Labour $0.42 $3,402.00 $3,402.00 Utilities $0.35 $2,835.00 $2,835.00 Depreciation $2,830.00 $2,830.00 Property Tax $870.00 $870.00 Insurance $1,540.00 $1,540.00 Purchase price $87,328.00 -$87,328.00 Frieght & Inspection $0.38 $3,078.00 -$3,078.00 Receiving Cost $1,290.00 -$1,290.00 Total Annual Cost $92,396.00 $91,696.00 $700.00

Related Questions

Navigate

• Browse (All)
• Browse P
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.