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For many years, Diehl Company has produced a small electrical part that it uses in the production of its standard line of diesel tractors. The company unit product cost for the part, based on a production level of 60,000 parts per year, is as follows: Direct materials $6.00 Direct labor 3.20 Variable manufacturing overhead 0.60 Fixed manufacturing overhead, traceable 3.00 $180,000 Fixed manufacturing overhead,common (allocated on the basis of labor-hours) 2.00 $120,000 Unit product cost $14.80 An outside supplier has offered to supply the electrical parts to the Diehl Company for only $11.80 per part. One-third of the traceable fixed manufacturing cost is supervisory salaries and other costs that can be eliminated if the parts are purchased. The other two-thirds of the traceable fixed manufacturing costs consist of depreciation of special equipment that has no resale value. Economic depreciation on this equipment is due to obsolescence rather than wear and tear. The decision to buy the parts from the outside supplier would have no effect on the common fixed costs of the company, and the space being used to produce the parts would otherwise be idle. Required: 1. Determine the total relevant cost if parts are made inside the company. (Do not round intermediate calculations. Round your answer to the nearest dollar amount.) Total relevant cost (60,000 parts) $_______ 2. Determine the total relevant cost if parts are purchased from the outside supplier. (Do not round intermediate calculations. Round your answer to the nearest dollar amount.) Total relevant cost (60,000 parts) $______ 3. What is the increase or decrease in profits as a results of purchasing the parts from the outside supplier rather than making them inside the company? (Input the amount as a positive value. Do not round intermediate calculations. Round your answer to the nearest dollar amount.) Profit would increase or decrease by $_____per year
The underlying rationale for the alimony rules is that: 1. The fruit and tree metaphor should be rigorously applied.
Ollie Mace has recently been appointed controller of S. Dilley & Company, a family-owned manufacturing firm founded 28 years ago. The firm manufactures automotive parts. Its four major operating divisions are heat treating, extruding, small parts ..
A company provides services on account during the current year totaling $400,000. By the end of the year, $350,000 of this amount had been received on account from customers for services provided in the prior years. Determine the amount of operati..
What are the rational of recognising costs as expenses at the time of project sale? Which are the accounting factors that sometimes keep reported operating results from reflecting the change in the value of a company?
In its 2004 income statement, what amount of interest expense should Gonzalez report from this lease transaction?
Can financial statement users of not-for-profit hospitals' financial statements expect to be fully informed regarding affiliated parties, such as the linkages between St. Jude Children's Research Hospital, ALSAC, and the foundation cited? Explain.
Lagerfield Company reported the following results from the sale of 5,000 hammers in May: sales $200,000, variable costs $120,000, fixed costs $60,000, and net income $20,000. Assume that Lagerfield increases the selling price of hammers by 10% on ..
Assume a government leases equipment to be used in governmental activities under a noncancelable lease, meeting the requirements for classification as a capital lease. Where would the capital lease be reported in the government's financial stateme..
M estimated that there were 200 vacation days available at December 31, 2009. M's employees earn an average of $150 per day. In its December 31, 2009, balance sheet, what amount of liability for compensated absences is M required to report?
Spoiled Baby Corp (SPC) sells baby buggies. Recent changes in the law required SPC to warranty its products for 90 days and you must set up the required accounts. Historical Data indicates that 6% of monthly sales result in warranty claims. The Ju..
The little Black Dress Shop (TLBDS) started the 2008 accounting period with the balances given in the financial statements model shown below. During 2008 TLBDS experienced the following business events.
The Temple Toy Company has decided to manufacture a new toy tractor, the production of which is broken into six steps. The demand for the tractor is 4,800 units per 40-hour workweek. a) Draw a precedence diagram of this operation
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