Question

Tuscaloosa Company manufactures a hand-held computer. The company expects production of 7,000 units this year. Currently,...

Tuscaloosa Company manufactures a hand-held computer. The company expects production of 7,000 units this year. Currently, Tuscaloosa produces the processor, which is a component of the computer. Tuscaloosa has received an offer from Auburn, Inc., to supply the processor.

If Tuscaloosa discontinues production of the processor, the company will be able to eliminate its product-level costs because no other products along the same line are produced by the company. However, due to its concern for quality, the company will have to inspect each processor made by Auburn. Various costs and items are described below:

Required:

Using the drop menus, classify each cost item in the context of the outsourcing decision as: Relevant (Varies between alternatives), Relevant (Opportunity cost), Irrelevant (Unavoidable future cost) or Irrelevant (Sunk cost).

(Note: A cost varies if the amount of the cost differs between the two alternatives: (1) continuing to make the processors or (2) purchasing the processors from Auburn.)

Cost of purchasing the processors from Auburn

Answer 1Choose...Relevant (Varies between alternatives)Irrelevant (Unavoidable future cost)Irrelevant (Sunk cost)Relevant (Opportunity cost)

Income that can be earned from renting the idled facilities if Tuscaloosa no longer makes the processors

Answer 2Choose...Relevant (Varies between alternatives)Irrelevant (Unavoidable future cost)Irrelevant (Sunk cost)Relevant (Opportunity cost)

Direct materials costs

Answer 3Choose...Relevant (Varies between alternatives)Irrelevant (Unavoidable future cost)Irrelevant (Sunk cost)Relevant (Opportunity cost)

Direct labor costs

Answer 4Choose...Relevant (Varies between alternatives)Irrelevant (Unavoidable future cost)Irrelevant (Sunk cost)Relevant (Opportunity cost)

Variable overhead costs

Answer 5Choose...Relevant (Varies between alternatives)Irrelevant (Unavoidable future cost)Irrelevant (Sunk cost)Relevant (Opportunity cost)

Cost of equipment used to make processors

Answer 6Choose...Relevant (Varies between alternatives)Irrelevant (Unavoidable future cost)Irrelevant (Sunk cost)Relevant (Opportunity cost)

Fixed manufacturing overhead

Answer 7Choose...Relevant (Varies between alternatives)Irrelevant (Unavoidable future cost)Irrelevant (Sunk cost)Relevant (Opportunity cost)

Inspection costs if processor is purchased from Auburn

Answer 8Choose...Relevant (Varies between alternatives)Irrelevant (Unavoidable future cost)Irrelevant (Sunk cost)Relevant (Opportunity cost)

Processor Department Manager's Salary

Answer 9Choose...Relevant (Varies between alternatives)Irrelevant (Unavoidable future cost)Irrelevant (Sunk cost)Relevant (Opportunity cost)

Depreciation on machinery used to make the processors

Answer 10Choose...Relevant (Varies between alternatives)Irrelevant (Unavoidable future cost)Irrelevant (Sunk cost)Relevant (Opportunity cost)

Allocated corporate costs

Answer 11Choose...Relevant (Varies between alternatives)Irrelevant (Unavoidable future cost)Irrelevant (Sunk cost)Relevant (Opportunity cost)
Business   Accounting   
0 0
Add a commentTranscribed image text
Next >

Homework Answers

Answer #1

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
Gilberto Company currently manufactures 60,000 units per year of one of its crucial parts. Variable costs...
Gilberto Company currently manufactures 60,000 units per year of one of its crucial parts. Variable costs are $1.60 per unit, fixed costs related to making this part are $60,000 per year, and allocated fixed costs are $30,000 per year. Allocated fixed costs are unavoidable whether the company makes or buys the part. Gilberto is considering buying the part from a supplier for a quoted price of $2.80 per unit guaranteed for a three-year period. Calculate the total incremental cost of...
Exercise 23-4 Make or buy decision LO A1 Gilberto Company currently manufactures 60,000 units per year...
Exercise 23-4 Make or buy decision LO A1 Gilberto Company currently manufactures 60,000 units per year of one of its crucial parts. Variable costs are $1.80 per unit, fixed costs related to making this part are $60,000 per year, and allocated fixed costs are $30,000 per year. Allocated fixed costs are unavoidable whether the company makes or buys the part. Gilberto is considering buying the part from a supplier for a quoted price of $3.00 per unit guaranteed for a...
xercise 23-5 Make or buy LO A1 Gelb Company currently manufactures 41,500 units per year of...
xercise 23-5 Make or buy LO A1 Gelb Company currently manufactures 41,500 units per year of a key component for its manufacturing process. Variable costs are $5.15 per unit, fixed costs related to making this component are $79,000 per year, and allocated fixed costs are $80,500 per year. The allocated fixed costs are unavoidable whether the company makes or buys this component. The company is considering buying this component from a supplier for $3.70 per unit. Calculate the total incremental...
What differentiates a sunk cost from a relevant cost? a. A sunk cost occurred in the...
What differentiates a sunk cost from a relevant cost? a. A sunk cost occurred in the past and doesn’t affect decision making. A relevant cost differs between alternatives and is used in decision making. b. A relevant cost occurred in the past and doesn’t affect decision making. A sunk cost differs between alternatives and is used in decision making. c. Both costs are used is decision making. d. Neither cost is used in decision making. What is true of opportunity...
Gelb Company currently manufactures 47,000 units per year of a key component for its manufacturing process....
Gelb Company currently manufactures 47,000 units per year of a key component for its manufacturing process. Variable costs are $6.25 per unit, fixed costs related to making this component are $71,000 per year, and allocated fixed costs are $65,500 per year. The allocated fixed costs are unavoidable whether the company makes or buys this component. The company is considering buying this component from a supplier for $3.90 per unit. Calculate the total incremental cost of making 47,000 units and buying...
Which of the following is not a criterion of relevant information? a-Differences among alternatives will occur...
Which of the following is not a criterion of relevant information? a-Differences among alternatives will occur in the future. b-It differs between the alternatives and differences among alternatives will occur in the future. c-Differences among the alternatives must have occurred in the past and must occur in the future. d-It differs between the alternatives. Bramble Manufacturing has an annual capacity of 80,300 units per year. Currently, the company is making and selling 78,500 units a year. The normal sales price...
Gelb Company currently manufactures 43,500 units per year of a key component for its manufacturing process....
Gelb Company currently manufactures 43,500 units per year of a key component for its manufacturing process. Variable costs are $6.25 per unit, fixed costs related to making this component are $73,000 per year, and allocated fixed costs are $71,500 per year. The allocated fixed costs are unavoidable whether the company makes or buys this component. The company is considering buying this component from a supplier for $3.50 per unit. Calculate the total incremental cost of making 43,500 and buying 43,500...
Gelb Company currently manufactures 40,000 units per year of a key component for its manufacturing process....
Gelb Company currently manufactures 40,000 units per year of a key component for its manufacturing process. Variable costs are $6.25 per unit, fixed costs related to making this component are $73,000 per year, and allocated fixed costs are $83,500 per year. The allocated fixed costs are unavoidable whether the company makes or buys this component. The company is considering buying this component from a supplier for $3.50 per unit. Calculate the total incremental cost of making 40,000 units and buying...
Gilberto Company currently manufactures 60,000 units per year of one of its crucial parts. Variable costs...
Gilberto Company currently manufactures 60,000 units per year of one of its crucial parts. Variable costs are $2.30 per unit, fixed costs related to making this part are $60,000 per year, and allocated fixed costs are $45,000 per year. Allocated fixed costs are unavoidable whether the company makes or buys the part. Gilberto is considering buying the part from a supplier for a quoted price of $3.50 per unit guaranteed for a three-year period. Calculate the total incremental cost of...
Make-or-Buy Decision Wisconsin Arts of Milwaukee employs five people in its Publication Department. These people lay...
Make-or-Buy Decision Wisconsin Arts of Milwaukee employs five people in its Publication Department. These people lay out pages for pamphlets, brochures, and other publications for the productions. The pages are delivered to an outside company for printing. The company is considering an outside publication service for the layout work. The outside service is quoting a price of $22 per layout page. The budget for the Publication Department is as follows: Salaries $190,000 Benefits 51,000 Supplies 32,000 Office expenses 24,000 Office...
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT