Exam 13: Budgetary Control and Responsibility Accounting

Tex's Manufacturing Company can make 100 units of a necessary component part with the following costs: Direct Materials \ 120,000 Direct Labor 25,000 Variable Overhead 45,000 Fixed Overhead 30,000 If Tex's Manufacturing Company can purchase the component externally for $190000 and only $5000 of the fixed costs can be avoided what is the correct make-or-buy decision?

A company has a process that results in 24000 pounds of Product A that can be sold for $8 per pound.An alternative would be to process Product A further at a cost of $160000 and then sell it for $14 per pound.Should management sell Product A now or should Product A be processed further and then sold? What is the effect of the action?

Sandusky Inc.has the following costs when producing 100000 units: Variable costs \ 600,000 Fixed costs 900,000 An outside supplier is interested in producing the item for Sandusky.If the item is produced outside Sandusky could use the released production facilities to make another item that would generate $150000 of net income.At what unit price would Sandusky accept the outside supplier's offer if Sandusky wanted to increase net income by $120000?

The net advantage (disadvantage) of replacing the old equipment with the new equipment is

Chapman Company manufactures widgets.Embree Company has approached Chapman with a proposal to sell the company widgets at a price of $125000 for 100000 units.Chapman is currently making these components in its own factory.The following costs are associated with this part of the process when 100000 units are produced: Direct materials \ 46,500 Direct labor 43,500 Manufacturing overhead 60,000 Total \ 150,000 The manufacturing overhead consists of $24000 of costs that will be eliminated if the components are no longer produced by Chapman.From Chapman's point of view how much is the incremental cost or savings if the widgets are bought instead of made?

Bell's Shop can make 1000 units of a necessary component with the following costs: Direct Materials \ 24,000 Direct Labor 6,000 Variable Overhead 3,000 Fixed Overhead ? The company can purchase the 1000 units externally for $39000.The unavoidable fixed costs are $2000 if the units are purchased externally.An analysis shows that at this external price the company is indifferent between making or buying the part.What are the fixed overhead costs of making the component?