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Phantasy [73]
3 years ago
8

Ahrends Corporation makes 70,000 units per year of a part it uses in the products it manufactures. The unit product cost of this

part is computed as follows: Direct materials $ 17.80 Direct labor 19.00 Variable manufacturing overhead 1.00 Fixed manufacturing overhead 17.10 Unit product cost $ 54.90 An outside supplier has offered to sell the company all of these parts it needs for $48.50 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 $273,000 per year. If the part were purchased from the outside supplier, all of the direct labor cost of the part would be avoided. However, $8.20 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 $54.90 is relevant in the decision of whether to make or buy the part?
Business
1 answer:
Lelechka [254]3 years ago
8 0

Answer:

$48.50

Explanation:

Relevant costs are the costs that are influenced by managerial decisions.They are future costs that have the tendency to affect the cash flow or outflow above the current level , that are relevant in making decisions . Examples are opportunity cost , incremental cost

The relevant cost in the scenario is the cost of buying from the supplier instead of in-house manufacturing , which is $48.50

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- wuat is the result of a good business decision? (1 point)
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It sacrifice short-term losses for long-term benefit.

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5 0
3 years ago
Shellhammer Company's inventory records show the following data for the month of September: Units Unit Cost Inventory, September
Pie

Answer:

Shellhammer Company

Ending inventory = $712

Cost of goods sold = $2,492

Explanation:

a) Data and Calculations:

Date                     Item          Units           Unit Cost     Total Cost

September 1    Inventory           100           $3.34          $334.00

September 8   Purchases        450             3.50          1,575.00

September 18 Purchases        350              3.70          1,295.00

September 30 Total                900                            $3,204.00

Ending inventory                     200

Cost of goods sold                 700

Weighted Average cost = Total cost of goods available for sale/Total units available for sale

= $3,204/900 = $3.56

Value of Ending Inventory = $3.56 * 200 = $712

Value of Cost of goods sold = $3.56 * 700 = $2,492

b) The weighted average inventory costing, under the period inventory system, used by Shellhammer is an assumption that the costs attributable to ending inventory and cost of goods sold are determined from the average cost per unit and that these the average cost is ascertained at the end of the period.  Therefore, the cost of beginning inventory and purchases are accumulated and divided by the units of goods available for sale.

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