Vintech Manufacturing incurs unit costs of $5 ($4 variable and $1 fixed) in maki
ID: 2721654 • Letter: V
Question
Vintech Manufacturing incurs unit costs of $5 ($4 variable and $1 fixed) in making a subassembly part for its finished product. A supplier offers to make 16,100 of the part at $5.80 per unit. If the offer is accepted, Vintech will save all variable costs but no fixed costs. Prepare an analysis showing the total cost saving, if any, Vintech will realize by buying the part. (If an amount reduces the net income for Increase (Decrease) column then enter with a negative sign preceding the number e.g. -15,000 or parenthesis, e.g. (15,000). Enter all other amounts in all other columns as positive and subtract where necessary.) Make Buy Net Income Increase (Decrease) Variable manufacturing costs $ $ $ Fixed manufacturing costs Purchase price Total annual cost $ $ $ The decision should be to_____________________________________________
Brief Exercise 23-6 Ridley Company has a factory machine with a book value of $91,500 and a remaining useful life of 4 years. A new machine is available at a cost of $220,000. This machine will have a 4-year useful life with no salvage value. The new machine will lower annual variable manufacturing costs from $575,300 to $368,200. Prepare an analysis showing whether the old machine should be retained or replaced. (If an amount reduces the net income for Increase (Decrease) column then enter with a negative sign preceding the number e.g. -15,000 or parenthesis, e.g. (15,000). Enter all other amounts in all other columns as positive and subtract where necessary.) Retain Equipment Replace Equipment Net 4-Year Income Increase (Decrease) Variable manufacturing costs $ $ $ New machine cost Total $ $ $ The old factory machine should be .
Explanation / Answer
Answer (1)
Answer 2
Particulars Make Buy Income Increase (Decrease) Variable manufacturing costs (16100*4) 64400 64400 Fixed costs (16100*1) 16100 16100 0 Purchase price (16100*5.80) 93380 -93380 Total annual cost 80500 109480 -28980 The decision should be to MAKE THE PRODUCTRelated Questions
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