The Gilster Company, a machine tooling firm, has several plants. One plant, located in St. Cloud,...
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The Gilster Company, a machine tooling firm, has several plants. One plant, located in St. Cloud, Minnesota, uses a job order costing system for its batch production processes. The St. Cloud plant has two departments through which most jobs pass. Plant-wide overhead, which includes the plant manager's salary, accounting personnel, cafeteria, and human resources, is budgeted at $300.000. During the past year, actual plantwide overhead was $286,000. Each department's overhead consists primarily of depreciation and other machine-related expenses. Selected budgeted and actual data from the St. Cloud plant for the past year are as follows. Department A Department B $ 151,200 $ 540,000 170,000 560,000 Budgeted department overhead (excludes plantwide overhead) Actual department overhead Expected total activity: Direct labor hours Machine-hours Actual activity: Direct labor hours Machine-hours Direct materials Direct labor cost: Department A (2,600 hr). Department B (1,500 hr) Machine hours projected: Department A Department B Units produced $24,000 For the coming year, the accountants at the St. Cloud plant are in the process of helping the sales force create bids for several jobs. Projected data pertaining only to job no. 110 are as follows. 39,000 12,400 150 1,200 7,000 34,eee 18,000 36,588 18,800 Incremental profit eamed by producing the other job incremental cost of buying the parts from the subcontractor Increase in total profits 20,000 45,000 18,800 47,000 f. Would your response to part e change if the St. Cloud plant could use the facilities necessary to produce p for job no. 110 for another job that could earn an incremental profit of $27,000? e. A St. Cloud subcontractor has offered to produce the parts for job no. 110 for a price of $14.5 per unit. Assume the St. Cloud sales force has already committed to the bid price based on the calculations in part b. Should the St. Cloud plant buy the $14.5 per unit part from the subcontractor or continue to make the parts for job no. 110 itself? The Gilster Company, a machine tooling firm, has several plants. One plant, located in St. Cloud, Minnesota, uses a job order costing system for its batch production processes. The St. Cloud plant has two departments through which most jobs pass. Plant-wide overhead, which includes the plant manager's salary, accounting personnel, cafeteria, and human resources, is budgeted at $300.000. During the past year, actual plantwide overhead was $286,000. Each department's overhead consists primarily of depreciation and other machine-related expenses. Selected budgeted and actual data from the St. Cloud plant for the past year are as follows. Department A Department B $ 151,200 $ 540,000 170,000 560,000 Budgeted department overhead (excludes plantwide overhead) Actual department overhead Expected total activity: Direct labor hours Machine-hours Actual activity: Direct labor hours Machine-hours Direct materials Direct labor cost: Department A (2,600 hr). Department B (1,500 hr) Machine hours projected: Department A Department B Units produced $24,000 For the coming year, the accountants at the St. Cloud plant are in the process of helping the sales force create bids for several jobs. Projected data pertaining only to job no. 110 are as follows. 39,000 12,400 150 1,200 7,000 34,eee 18,000 36,588 18,800 Incremental profit eamed by producing the other job incremental cost of buying the parts from the subcontractor Increase in total profits 20,000 45,000 18,800 47,000 f. Would your response to part e change if the St. Cloud plant could use the facilities necessary to produce p for job no. 110 for another job that could earn an incremental profit of $27,000? e. A St. Cloud subcontractor has offered to produce the parts for job no. 110 for a price of $14.5 per unit. Assume the St. Cloud sales force has already committed to the bid price based on the calculations in part b. Should the St. Cloud plant buy the $14.5 per unit part from the subcontractor or continue to make the parts for job no. 110 itself?
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To determine the incremental profit earned by producing the other job and the incremental cost of buying the parts from a subcontractor we need to compare the costs and revenues associated with produc... View the full answer
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Financial and Managerial Accounting the basis for business decisions
ISBN: 978-0078111044
16th edition
Authors: Jan Williams, Susan Haka, Mark Bettner, Joseph Carcello
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