The production manager at martinez has pointed out that if

Assignment Help Accounting Basics

Reference no: EM13575140

Martinez, Inc. makes G18 internally. 16,000 units of this part are produced and used every year in making one of Martinez's products. The costs of producing G18, given the current level of activity, are as follows:

	Per unit
Direct material	$2.90
Direct labor	$3.90
Variable manufacturing overhead	$6.70
Supervisor's salary	$7.20
Depreciation of special equipment	$8.30
Other allocated manufacturing overhead	$5.40

One of Martinez's vendors has offered to sell the part to the company for $25.00 each. If Martinez stops making the part internally, the supervisor's salary and all of the variable costs can be avoided. There is a special piece of equipment that is used to make the part but it was purchased a number of years ago and has no salvage value or alternative use. 10% of the other allocated manufacturing overhead costs would be avoided if the part were purchased instead of produced internally.

The production manager at Martinez has pointed out that if the part were purchased, the extra space could be used to produce more of one of the company's products, generating an additional segment margin of $50,000 per year for that product.

If Martinez accepts the vendor's offer, what will the financial impact be on operations? (Note the dollar impact and whether net income would increase or decrease)

Reference no: EM13575140

Questions Cloud

Use the excel template for this model to check the current : the friendly neighbor grocery store has a single checkout stand with a full-time cashier. customers arrive randomly at

The following sales are predicted for a companys next four : the following sales are predicted for a companys next four months month units september 480 october 560 november 600

Quantity variances for direct cost categories direct : quantity variances for direct cost categories direct materials and direct labor are based on differences between the

Maisley manufacturing decided to analyze certain costs for : maisley manufacturing decided to analyze certain costs for june of the current year. units started into production

The production manager at martinez has pointed out that if : martinez inc. makes g18 internally. 16000 units of this part are produced and used every year in making one of

Assume that the company now splits its stock 5-for-1 show : the stockholders equity section of the balance sheet of the xyz corp. is as followscommon stock 5 par 20000000retained

A department adds materials at the beginning of the process : a department adds materials at the beginning of the process and incurs conversion costs uniformly throughout the

You own a stock portfolio invested 32 percent in stock q : you own a stock portfolio invested 32 percent in stock q 19 percent in stock r 38 percent in stock s and 11 percent in

A project with a shorter payback period would always be : true or false1. the net present value of a project will be negative if the required rate of return is greater than the

User Account

All Pages