Question Details

(Solution Download) The management of Shatner Manufacturing Company is trying to decide whether to continue manufacturin


 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

The management of Shatner Manufacturing Company is trying to

 

decide whether to continue manufacturing a part or to buy it from

 

an outside supplier. The part, called CISCO, is a component of the

 

companyAc??cs finished product.

 


 

   The following information was collected from the

 

accounting records and production data for the year ending December

 

31, 2014.

 


 

1. 7,900 units of CISCO were produced in the Machining

 

Department.

 

2. Variable manufacturing costs applicable to the production of

 

each CISCO unit were:

 

    direct materials $5.22, direct labor $4.23,

 

indirect labor $0.48, utilities $0.39.

 

3. Fixed manufacturing costs applicable to the production of CISCO

 

were:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cost ItemDirectAllocated
Depreciation$2,030$930
Property taxes540460
Insurance920620
$3,490$2,010

 


 

All variable manufacturing and direct fixed costs will be

 

eliminated if CISCO is purchased. Allocated costs will have to be

 

absorbed by other production departments.

 


 

4. The lowest quotation for 7,900 CISCO units from a supplier is

 

$82,021.

 

5. If CISCO units are purchased, freight and inspection costs would

 

be $0.35 per unit, and receiving costs totaling $1,270 per year

 

would be incurred by the Machining Department.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Collapse question part

 

(a)

 

Prepare an incremental analysis for CISCO. (Enter

 

negative amounts using either a negative sign preceding the number

 

e.g. -45 or parentheses e.g. (45).)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Make CISCOBuy CISCONet Income

 

Increase

 

(Decrease)

Direct material$$$
Direct labor
Indirect labor
Utilities
Depreciation
Property taxes
Insurance
Purchase price
Freight and inspection
Receiving costs
   Total annual cost$$$

 

 

 

 


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