Question

The Talbot Corporation makes wheels that it uses in the production of bicycles. Talbot's costs to...

The Talbot Corporation makes wheels that it uses in the production of bicycles. Talbot's costs to produce 90,000 wheels annually are: Direct materials $18,000 Direct labor $27,000 Variable manufacturing overhead $13,500 Fixed manufacturing overhead $57,000 An outside supplier has offered to sell Talbot similar wheels for $0.80 per wheel. If the wheels are purchased from the outside supplier, $12,000 of annual fixed overhead could be avoided and the facilities now being used could be rented to another company for $32,100 per year. Direct labor is a variable cost. If Talbot chooses to buy the wheel from the outside supplier, then annual net operating income would:

Business   Accounting   
0 0
Add a commentTranscribed image text
Next >

Homework Answers

Answer #1
Differential analysis
Make Buy Effect on Income
Direct material 18000 0 18000
Direct Labour 27000 0 27000
variable Mfg overheads 13500 0 13500
Fixed Mfg overheads 57000 45000 12000
Cost of purchases 0 72000 -72000
Opportunity cost-Rental value 32100 0 32100
Incremental cost 147600 117000 30600
When company chooses to buy:
The annual net operating income would INCREASE by $ 30600
0 0
Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Log In

Sign Up

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
The Talbot Corporation makes wheels that it uses in the production of bicycles. Talbot's costs to...
The Talbot Corporation makes wheels that it uses in the production of bicycles. Talbot's costs to produce 100,000 wheels annually are:                Direct materials $20,000 Direct labor $30,000 Variable manufacturing overhead $15,000 Fixed manufacturing overhead $58,000 An outside supplier has offered to sell Talbot similar wheels for $0.80 per wheel. If the wheels are purchased from the outside supplier, $13,000 of annual fixed overhead could be avoided and the facilities now being used could be rented to another company for $35,000...
The Talbot Corporation makes wheels that it uses in the production of bicycles. Talbot's costs to...
The Talbot Corporation makes wheels that it uses in the production of bicycles. Talbot's costs to produce 100,000 wheels annually are: Direct materials $30,000 Direct labor $50,000 Variable manufacturing overhead $20,000 Fixed manufacturing overhead $70,000 An outside supplier has offered to sell Talbot similar wheels for $1.25 per wheel. If the wheels are purchased from the outside supplier, $15,000 of annual fixed overhead could be avoided and the facilities now being used could be rented to another company for $45,000...
TB MC Qu. 07-108 The Talbot Corporation makes wheels that it… The Talbot Corporation makes wheels...
TB MC Qu. 07-108 The Talbot Corporation makes wheels that it… The Talbot Corporation makes wheels that it uses in the production of bicycles. Talbot's costs to produce 220,000 wheels annually are:                Direct materials $44,000 Direct labor $66,000 Variable manufacturing overhead $33,000 Fixed manufacturing overhead $82,000 An outside supplier has offered to sell Talbot similar wheels for $0.80 per wheel. If the wheels are purchased from the outside supplier, $37,000 of annual fixed overhead could be avoided and the facilities...
Talboe Company makes wheels which it uses in the production of children's wagons. Talboe's costs to...
Talboe Company makes wheels which it uses in the production of children's wagons. Talboe's costs to produce 200,000 wheels annually are as follows: Direct material...................................... $40,000 Direct labor......................................... 60,000 Variable manufacturing overhead......... 30,000 Fixed manufacturing overhead............. 70,000 Total.................................................. $200,000 An outside supplier has offered to sell Talboe similar wheels for $0.80 per wheel. If the wheels are purchased from the outside supplier, $25,000 of annual fixed manufacturing overhead would be avoided and the facilities now being used to make the...
The Roosevelt Company presently makes 27,000 units of a certain component each year for use on...
The Roosevelt Company presently makes 27,000 units of a certain component each year for use on its production line.  The cost per unit for the component at this level of activity is as follows Direct materials.................................$4.20 Direct Labor.....................................$12.00 Variable factory overhead................. $5.80 Fixed factory overhead......................$6.50 Roosevelt has received an offer from an outside supplier who is willing to provide 27,000 units of this component at a price of $25 per component.  Assume that if the component is purchased from the outside supplier,...
Sarasota Bicycles has been manufacturing its own wheels for its bikes. The company is currently operating...
Sarasota Bicycles has been manufacturing its own wheels for its bikes. The company is currently operating at 100% capacity, and variable manufacturing overhead is charged to production at the rate of 30% of direct labor cost. The direct materials and direct labor cost per unit to make the wheels are $3.00 and $3.60 respectively. Normal production is 200,000 wheels per year. A supplier offers to make the wheels at a price of $8 each. If the bicycle company accepts this...
The SP Corporation makes 43,000 motors to be used in the production of its sewing machines....
The SP Corporation makes 43,000 motors to be used in the production of its sewing machines. The average cost per motor at this level of activity is: Direct materials $ 10.20 Direct labor $ 9.20 Variable manufacturing overhead $ 3.80 Fixed manufacturing overhead $ 4.75 An outside supplier recently began producing a comparable motor that could be used in the sewing machine. The price offered to SP Corporation for this motor is $26.05. If SP Corporation decides not to make...
The SP Corporation makes 40,000 motors to be used in the production of its sewing machines....
The SP Corporation makes 40,000 motors to be used in the production of its sewing machines. The average cost per motor at this level of activity is: Direct materials $ 9.90 Direct labor $ 8.90 Variable manufacturing overhead $ 3.65 Fixed manufacturing overhead $ 4.60 An outside supplier recently began producing a comparable motor that could be used in the sewing machine. The price offered to SP Corporation for this motor is $25.15. If SP Corporation decides not to make...
Boston Beer Company prints the labels for all of its beer bottles. Boston Beer's costs to...
Boston Beer Company prints the labels for all of its beer bottles. Boston Beer's costs to produce 1,000,000 labels annually are: Direct materials $30,000 Direct labor $50,000 Variable overhead $20,000 Fixed overhead $70,000 An outside supplier has offered to print Boston Beer’s labels for 13 cents per label. If the labels are purchased from the outside supplier, $15,000 of annual fixed overhead could be avoided and the space now being used for printing could be rented to another company for...
Your Company makes 35,000 motors to be used in the production of its sewing machines. The...
Your Company makes 35,000 motors to be used in the production of its sewing machines. The cost per motor at this level of activity is: Direct materials $4.50 Direct labor $4.60 Variable manufacturing overhead $3.75 Fixed manufacturing overhead $3.40 An outside supplier has offered to supply all the motors the company needs for $15 each. If Your Company decides to buy the motors, there would be no other use for the production facilities and 25% of the fixed manufacturing overhead...
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT