How much of the fixed overhead must be avoidable

Assignment Help Financial Accounting
Reference no: EM132926897

Question - Mountain Technologies manufactures fiberglass housings for portable generators. One of the parts required to manufacture a house is a metal handle. Currently the company produces all of the metal latches that it requires (120,000 units annually). The company's management is considering purchasing the part from an external vendor, Astex Mechanical. The following data are available for making the decision:

Cost per Unit to Manufactured Buy Direct Material Br. 10.00 Direct Labour 8.50 Variable Overhead 4.50 Fixed Overhead-Applied 7.00 Purchase Price Br. 24.50 Freight Charges. 0.50 Total Cost Br. 30.00 Br. 25.00

Required -

(a) Assuming all of Mountain Technologies' internal production costs are avoidable if it purchases rather than makes the metal handle, what would be the net annual cost advantage to Mountain Technologies of purchasing?

(b) Assume that some of Mountain Technologies' fixed overhead costs could not be avoided if it purchases rather than makes the metal handles. How much of the fixed overhead must be avoidable for the company to be indifferent between making and buying the component?

Reference no: EM132926897

Questions Cloud

What suggestions did the authors give for the development : What suggestions did the authors give for the development of effective interventions to increase physical activity among people with physical disabilities
Determine appropriate employee engagement strategies : Talent Acquisition: Determine appropriate strategies for acquiring qualified talent, and explain how the strategies support organizational goals.
Identifying potential improvements on individual performance : The appraisal process is one step involved in identifying potential improvements on individual performances.
Describe the economic importance of monocots : Describe the economic importance of monocots.
How much of the fixed overhead must be avoidable : How much of the fixed overhead must be avoidable for the company to be indifferent between making and buying the component
How to migrate data to the new system : Data insertion and migration: Explain how to migrate data to the new system and maintain data integrity, including related processes and tools.
Discuss the value of land in africa : Using this statement as a point of departure, discuss the value of land in Africa. In answering this question, use relevant examples to support your answer.
Describe the limitation of the study on roi : Describe the limitation of the study on ROI (Return on investment) in online training programme.
Explain purpose of the wagner act of 1935 : Traditionally, the activities of labor unions have supported the development of gains for the American worker.

Reviews

Write a Review

Financial Accounting Questions & Answers

  Total state taxable income

Total state taxable income: $50 million Sales: State A: $60 mil State B: $30 mil Other states

  Whs t the bonus will be for curry

If bonus method is to be used in admitting Curry, the bonus will be? The partnership is contemplating whether to use the bonus or asset revaluation method.

  How much each class of shares should receive dividend

How much each class of shares should receive dividend and prepare the Journal entry(s) to record this dividend. (Hint: that there is no dividend in arrears.

  Solve free cash flow income statement

Solve free cash flow income statement 2017 sales 1640 cost of sales 880 for 2017 for Monarch Textiles inc. Based on the financial information

  Income tax expense-deferred income taxes-income tax payable

Following is information concerning the difference between Guilbert Corporation's taxable income and its GAAP income. Prepare the journal entry to record income tax expense, deferred income taxes, and income tax payable for 2014.

  Which the journal entry would include

At any bond interest payment date regarding bonds that have been issued at a premium, the journal entry would include Debit Bond interest expense

  What happens if the market price rises

What happens to the amount over market that was actually paid for the inventory? Explain? Now, what happens if the market price rises

  Calculate the current share price in each case

The required rate of return on the shares in the companies identified below is 8% pa. Calculate the current share price (ex-dividend) in each case

  Why investments are valued at current market value

Why investments are valued at current market value while other assets such as property, plant and equipment are not adjusted to fair market value.

  How much cash can be distributed safely at this point

The expenses of liquidating the business (advertising, rent, travel, etc.) are estimated at P25,000. How much cash can be distributed safely at this point

  The par value method and constructive retirement method

When stock of the company is purchased, treasury stock, three methods are available to record this transaction: the cost method, the par value method, and the constructive retirement method. Discuss the following: The difference between the cost, par..

  What adjusting entry will dorchester make on tuesday

Falls on Tuesday, and Dorchester will pay its employees on Friday for the full week. What adjusting entry will Dorchester make on Tuesday, December 31?

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd