Nelson Company's Radio Division currently is purchasing transistors from Charlotte Co. for $3.50 each. The total number of transistors needed is 8,000 per month. Nelson Company's Electronics Division can produce the transistors for a cost of $4.00 each, and it has plenty of capacity to manufacture the units. The $4.00 is made up of $3.25 in variable costs, and $0.75 in allocated fixed costs. The range of a possible transfer price should be Oa. $3.51 to $3.99 Ob. $3.25 to $3.50 Oc. $3.26 to $3.99 Od. $3.26 to $3.49
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- Dimitri Designs has capacity to produce 30,000 desk chairs per year and is currently selling all 30,000 for $240 each. Country Enterprises has approached Dimitri to buy 800 chairs for $210 each. Dimitris normal variable cost is $165 per chair, including $50 per unit in direct labor per chair. Dimitri can produce the special order on an overtime shift, which means that direct labor would be paid overtime at 150% of the normal pay rate. The annual fixed costs will be unaffected by the special order and the contract will not disrupt any of Dimitris other operations. What will be the impact on profits of accepting the order?Shelby Industries has a capacity to produce 45.000 oak shelves per year and is currently selling 40,000 shelves for $32 each. Martin Hardwoods has approached Shelby about buying 1,200 shelves for a new project and is willing to pay $26 each. The shelves can be packaged in bulk; this saves Shelby $1.50 per shelf compared to the normal packaging cost. Shelves have a unit variable cost of $27 with fixed costs of $350,000. Because the shelves dont require packaging, the unit variable costs for the special order will drop from $27 per shelf to $25.50 per shelf. Shelby has enough idle capacity to accept the contract. What is the minimum price per shelf that Shelby should accept for this special order?Lander Parts, Inc., produces various automobile parts. In one plant, Lander has a manufacturing cell with the theoretical capability to produce 450,000 fuel pumps per quarter. The conversion cost per quarter is 9,000,000. There are 150,000 production hours available within the cell per quarter. Required: 1. Compute the theoretical velocity (per hour) and the theoretical cycle time (minutes per unit produced). 2. Compute the ideal amount of conversion cost that will be assigned per subassembly. 3. Suppose the actual time required to produce a fuel pump is 40 minutes. Compute the amount of conversion cost actually assigned to each unit produced. What happens to product cost if the time to produce a unit is decreased to 25 minutes? How can a firm encourage managers to reduce cycle time? Finally, discuss how this approach to assigning conversion cost can improve delivery time. 4. Assuming the actual time to produce one fuel pump is 40 minutes, calculate MCE. How much non-value-added time is being used? How much is it costing per unit? 5. Cycle time, velocity, MCE, conversion cost per unit (theoretical conversion rate actual conversion time), and non-value-added costs are all measures of performance for the cell process. Discuss the incentives provided by these measures.
- Emerald Island Company is considering building a manufacturing plant in County Kerry. Predicting sales of 100,000 units, Emerald Isle estimates the following expenses: An Irish firm that specializes in marketing will be engaged to sell the manufactured product and will receive a commission of 10% of the sales price. None of the U.S. home office expense will be allocated to the Irish facility. Required: 1. If the unit sales price is 2, how many units must be sold to break even? (Hint: First compute the variable cost per unit.) 2. Calculate the margin of safety ratio. 3. Calculate the contribution margin ratio.Hatch Manufacturing produces multiple machine parts. The theoretical cycle time for one of its products is 65 minutes per unit. The budgeted conversion costs for the manufacturing cell dedicated to the product are 12,960,000 per year. The total labor minutes available are 1,440,000. During the year, the cell was able to produce 0.6 units of the product per hour. Suppose also that production incentives exist to minimize unit product costs. Required: 1. Compute the theoretical conversion cost per unit. 2. Compute the applied conversion cost per minute (the amount of conversion cost actually assigned to the product). 3. Discuss how this approach to assigning conversion cost can improve delivery time performance. Explain how conversion cost acts as a performance driver for on-time deliveries.Polaris Inc. manufactures two types of metal stampings for the automobile industry: door handles and trim kits. Fixed cost equals 146,000. Each door handle sells for 12 and has variable cost of 9; each trim kit sells for 8 and has variable cost of 5. Required: 1. What are the contribution margin per unit and the contribution margin ratio for door handles and for trim kits? 2. If Polaris sells 20,000 door handles and 40,000 trim kits, what is the operating income? 3. How many door handles and how many trim kits must be sold for Polaris to break even? 4. CONCEPTUAL CONNECTION Assume that Polaris has the opportunity to rearrange its plant to produce only trim kits. If this is done, fixed costs will decrease by 35,000, and 70,000 trim kits can be produced and sold. Is this a good idea? Explain.
- Materials used by the Instrument Division of Ziegler Inc. are currently purchased from outside suppliers at a cost of 1,350 per unit. However, the same materials are available from the Components Division. The Components Division has unused capacity and can produce the materials needed by the Instrument Division at a variable cost of 900 per unit. a. If a transfer price of 1,000 per unit is established and 75,000 units of materials are transferred, with no reduction in the Components Divisions current sales, how much would Ziegler Inc.s total operating income increase? b. How much would the Instrument Divisions operating income increase? c. How much would the Components Divisions operating income increase?Nelson Company's Radio Division currently is purchasing transistors from Charlotte Co. for $3.50 each. The total number of transistors needed is 8,000 per month. Nelson Company's Electronics Division can produce the transistors for a cost of $4.00 each, and it has plenty of capacity to manufacture the units. The $4.00 is made up of $3.25 in variable costs, and $0.75 in allocated fixed costs. The range of a possible transfer price should be Oa. $3.51 to $3.99 Ob. $3.25 to $3.50 Oc. $3.26 to $3.49 Od. $3.26 to $3.99Nelson Company's Radio Division currently is purchasing transistors from Charlotte Co. for $3.50 each. The total number of transistors needed is 8,000 per month. Nelson Company's Electronics Division can produce the transistors for a cost of $4.00 each, and it has plenty of capacity to manufacture the units. The $4.00 is made up of $3.25 in variable costs, and $0.75 in allocated fixed costs. The range of a possible transfer price should be a. $3.26 to $3.99 b. $3.51 to $3.99 c. $3.26 to $3.49 d. $3.25 to $3.50
- Voltaic Electronics uses a standard part in the manufacture of different types of radios. The total cost of producing 36,000 parts is $ 100,000, which includes fixed costs of $ 40,000 and variable costs of $ 60,000. The company can buy the part from an outside supplier for $2 per unit and avoid 20% of the fixed costs. Assume that the company can use the freed manufacturing space to make another product that can earn a profit of $ 15,000. If Voltaic outsources, what will be the effect on operating income?A. decrease of $11,000B. increase of $ 11,000C. increase of $ 15,000D . decrease of $ 8,000Voltaic Electronics uses a standard part in the manufacture of different types of radios. The total cost of producing 36,000 parts is $110,000, which includes fixed costs of $50,000 and variable costs of $60,000. The company can buy the part from an outside supplier for $1 per unit and avoid 30% of the fixed costs. Assume that the company can use the freed manufacturing space to make another product that can earn a profit of $16,000. If Voltaic outsources, what will be the effect on operating income?Voltaic Electronics uses a standard part in the manufacture of different types of radios. The total cost of producing 35,000 parts is $105,000, which includes fixed costs of $50,000 and variable costs of $55,000. The company can buy the part from an outside supplier for $2 per unit and avoid 20% of the fixed costs. Assume that the company can use the freed manufacturing space to make another product that can earn a profit of $16,000. If Voltaic outsources, what will be the effect on operating income? A. increase of $11,000 B. decrease of $11,000 C. decrease of $10,000 D. increase of $16,000