Exercise 12-5 Novak nc. has been manufacturing its own finals or its curtain rod
ID: 2527430 • Letter: E
Question
Exercise 12-5 Novak nc. has been manufacturing its own finals or its curtain rods. The company s current y operating at 1 ?% o capacit and a able anuracturn overhead S charged to production at the rate of 65% of direct labor cost. The direct materials and direct labor cost per unit to make a pair o finals are $38 and 75, respectively. Normal production is 29,700 curtain rods per year A supplier offers to make a pair of finials at a price of $13.06 per unit. If Novak accepts the supplier's offer, all variable manufacturing costs will be eliminated, but the $43,000 of fixed manufacturing overhead currently being charged to the finials will have to be absorbed by other products. Prepare the incremental analysis for the decision to make or buy the finials. (Round answers to 0 decimal places, e.g. 1250. If amount decreases net income then enter the amount using either a negative sign preceding the number e.g. -45 or parentheses e.g. (45).) Net Income Increase (Decrease) Make Direct materials Direct labor Variable overhead costs Fixed manufacturing costs Purchase price Total annual costExplanation / Answer
Dear Student Thank you for using Chegg Please find below the answer Statementshowing Computations Paticulars Make Buy Net Income Increase (Decrease) Direct Materials = 29700*3.85 114,345.00 114,345.00 Direct Labour = 29700 *4.75 141,075.00 141,075.00 Variable overhead costs = 141075 *65% 91,698.75 91,698.75 Fixed manufacturing costs - - - Purchase price = 29700 *13.06 387,882.00 (387,882.00) Total Annual cost 347,118.75 387,882.00 (40,763.25)
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