Gigs electronics manufactures a subassembly for its main product. The costs per unit are

as follows:

Direct materials $44.00

Direct labour 30.00

Variable overhead 27.00

Fixed overhead 34.00

Total $135.00

Justin's Technologies has contacted Gigs electronics with an offer to sell 7,500 of the

subassemblies for $120.00 each. Gigs Electronics will eliminate $50,000 of fixed overhead

if it accepts the proposal.

Question:

Should Gigs Electronics make or buy the subassemblies? What is the difference between

the two alternatives?

Question 2

For 2020, Big Tech Corporation had sales of 225,000 units and production of 150,000 units. There was no beginning inventory. Other information for the year included:

Direct manufacturing labour $150,500

Variable manufacturing overhead 275,000

Direct materials 100,000

Variable selling expenses 110,000

Fixed administrative expenses 125,000

Fixed manufacturing overhead 210,000

Requirement:

Calculate the ending finished goods inventory under both absorption and variable

costing.

Question 3

Cristy's Bakery Products manufactures pastry boxes. Cristy's Bakery Products has a policy of adding a 25% markup to full costs and currently has excess capacity. The following information pertains to the company's normal operations per month:

Output units 5,000 pastry boxes

Machine-hours 3,000 hours

Direct manufacturing labour-hours 10,000 hours

Direct materials per unit $135

Direct manufacturing labour per hour $25

Variable manufacturing overhead costs $410,000

Fixed manufacturing overhead costs $700,000

Product and process design costs $655,000

Marketing and distribution costs $880,000

Cristy's Bakery Products is approached by an overseas customer to fulfil a one-time only special order for 2,000 units. All cost relationships remain the same except for a one-time setup charge of $75,000. No additional design, marketing, or distribution costs will be incurred.

Requirement:

What is the minimum acceptable bid per unit on this one-time-only special order?

Answer rating: 100% (QA)

Should Gigs Electronics Make or Buy Analysis To decide whether to make or buywe compare the total cost to produce including fixed overhead with the offered purchase price Cost to Produce per unit Dire... View the full answer