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Ede4ka [16]
2 years ago
12

Mohave Corp. is considering outsourcing production of the umbrella tote bag included with some of its products. The company has

received a bid from a supplier in Vietnam to produce 9,000 units per year for $8.00 each. Mohave has the following information about the cost of producing tote bags:
Direct materials $5.00
Direct labor 1.00
Variable manufacturing overhead 1.00
Fixed manufacturing overhead 2.00
Total cost per unit $9.00

Mohave has determined that all variable costs could be eliminated by outsourcing the tote bags, while 70 percent of the fixed overhead cost is unavoidable. At this time, Mohave has no specific use in mind for the space currently dedicated to producing the tote bags.

Required:
a. Compute the difference in cost between making and buying the umbrella tote bag.
b. Based strictly on the incremental analysis, should Mohave buy the tote bags or continue to make them?
Business
1 answer:
SOVA2 [1]2 years ago
6 0

Answer:

Please see below

Explanation:

1. The level of production for the subject analysis is 9,000 units per year

Options for outsourcing

Variable unit costs = $8.00

Unavoidable unit fixed costs = 70% × $2 = $1.4

Total : $8 + $1.4 = $9.4 per unit

In house option:

Direct materials = $5

Direct labor = $1

Variable manufacturing overhead = $1

Fixed manufacturing overhead = $2

Total : $9

The cost of buying the umbrella outside is $9.4 , which is $0.4 higher than making it in-company.

2. Mohave should continue to make the tote bags instead of buying them.

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never [62]

Answer:

The required rate of return for the project will be 13.087%

Explanation:

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r = 0.027 + 1.23 * 0.069

r = 0.11187 or 11.187%

The discount rate that is usually used for an all equity firm is its required rate of return. Thus, the required rate of return for the project will be,

r = 0.11187 +  0.019

r = 0.13087 or 13.087%

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3 years ago
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During the year the following selected transactions affecting stockholders' equity occurred for Orlando Corporation: a. Apr. 1 R
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Answer:

April 1

DR Treasury Stock <u>$7,800</u>

CR Cash <u>$7,800</u>

(<em>To record purchase of Treasury Stock</em>)

Working

Treasury Stock = 260 shares * $30

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DR Cash <u>$4,550</u>

CR Treasury Stock <u>$ 3,900</u>

CR Additional Paid-in Capital <u>$ 650</u>

(<em>To record sale of Treasury Stock</em>)

Working

When the stock sold is higher or lower than the price it was purchased or issued for, it is credited or debited to the Additional Paid-in Capital account respectively.

As the price it was sold for here was higher than what it was purchased for, the balance is credited.

Cash = 130 shares * $35

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Additional Paid-in Capital = 4,550 - 3,900

= $650

Sept 1.

DR Cash <u>$3,000</u>

DR Additional Paid-in Capital <u>$600</u>

CR Treasury Stock <u>$3,600</u>

(<em>To record sale of Treasury Stock</em>)

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7 0
3 years ago
A real estate company provides housing services to retired individuals. It basically helps individuals above the age of sixty to
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Answer:

The correct answer is the option E: It can charge very high prices.

Explanation:

To begin with, the business presented in the case as a real estate company that provides housing services to retired individuals who typically are above the age of sixty can charge high prices to their customer due to the fact that basically they are looking for the most important service that there is in the market, a house. Moreover, the fact that the company only sales to retired people and therefore it specializes in a niche market indicates that the company is good at what they do an that is why those individuals choose it. Furthermore, the fact that these elderly people go to the organization expecting to find a house with peaceful surroundings generates the fact that they are willing to pay as much as they can to have the best for them  at the very last of their time.

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3 years ago
Report a chef has a large container of olive oil. in one night, after he used 252525 quarts, 35.9\%35.9%35, point, 9, percent of
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He had a large container of 25 quarts. Then he used 25 quarts and 35.9% of the oil remained.
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