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zavuch27 [327]
2 years ago
15

Cruise Company produces a part that is used in the manufacture of one of its products. The unit manufacturing costs of this part

, assuming a production level of 6,000 units, are as follows:
Direct Materials $4.00
Direct Labor $4.00
Variable manufacturing overhead $3.00
Fixed manufacturing overhead $1.00
Total Cost $12.00

The fixed overhead costs are unavoidable.

Assume Cruise Company can purchase 6300 units of the part from Suri Company for $14.20 each, and the facilities currently used to make the part could be used to manufacture 6300 units of another product that would have an $13 per unit contribution margin. If no additional fixed costs would be incurred, what should Cruise Company do?
Business
1 answer:
saul85 [17]2 years ago
3 0

Answer and Explanation:

Here we choose between the making and buying decision

The making cost is

= Direct material per unit + direct labor per unit + variable manufacturing overhead per unit

= $4 + $4 + $3

= $11

And, the buying cost is $14.20

So Cruise company should make the part and save the $3.20 cost i.e. come from

= $14.20 - $11

= $3.20

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7 0
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4 0
3 years ago
12-3. (Break-even point and selling price) Simple Metal Works, Inc. will manufacture and sell 300,000 units next year. Fixed cos
aev [14]

Answer:

Selling price= $5.08

Explanation:

Giving the following information:

Number of units= 300,000

Fixed costs= $350,000

Desired profit= $250,000

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<u>First, we need to calculate the unitary contribution margin using the break-even point formula:</u>

Break-even point in units= (fixed costs + desired profit)/ contribution margin per unit

300,000 = (350,000 + 250,000) /  contribution margin per unit

300,000 contribution margin per unit = 600,000

contribution margin per unit= 600,000/300,000

contribution margin per unit= $2

<u>If the variable cost rate is 0.65, then:</u>

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5 0
3 years ago
Santa Fe purchased the rights to extract turquoise on a tract of land over a five-year period. Santa Fe paid $300,000 for extrac
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Answer:

The cost of depletion in the current year is $90,000

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Santa Fe's current year cost of depletion=cost of rights*Turquoise extracted in the current year/total estimated turquoise to be extracted

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turquoise extracted in the current year is 1,500 pounds

total estimated turquoise to be extracted over a five-year period is 5000 pounds

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By extension profit for the year assuming no other costs were incurred is :

$200,000-$90,000=$110,000

4 0
3 years ago
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