Question

eroblem 3-20 points cale, Inc. owns a machine that produces baskets for the packages the company sets. The con 900 baskets in production each month. The costs of m ica en 14 for dred materials, variable manufacturing ovemead, 52 for direct labor and $5 for food manufacturing overhead. The un is based on the monthly production of 900 baskets The con determined that 30% of the fored manufacturing overhead is avoidable. An outside supplier has offered to sell Cale the baskets for $13 each, and can supply all the units it needs Instructions Prepare an incremental analysis to determine if Caic should buy the baskets from the supplier. Problem 4 - 10 points Talia Corp. produces digital cameras. For each camera produced, direct materials are $20, direct laboris $16, variable manufacturing overhead is $12, fixed manufacturing overhead is $28, variable selling and administrative expenses are $10, and fixed selling and administrative expenses are $24. Instructions Compute the target selling price assuming a 40% markup on total per unit cost.

Answer 1

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Problem 3
		Make	Buy	Incremental
Purchase Price			$          13	$                  (13)
Direct Material		$             4	$           -	$                      4
Variable Overheads		$             3	$           -	$                      3
Direct Labor		$             2	$           -	$                      2
Fixed Overheads	$5*20%	$             5	$             1	$                      4
		$          14	$          14	$                     -
Total relevant cost for both the option is same at $14. Hence financially, its doesn’t matter whther to buy or make
Part 4
Direct Material		$          20
Direct Labor		$          16
Variable Overheads		$          12
Fixed Overheads		$          28
Variable Selling		$          10
Fixed Selling		$          24
Total Cost		$        110
Mark up 40%		$          44
Target Selling price		$        154