The management of Sunland Manufacturing Company is trying to decide whether to continue manufacturing a part...
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The management of Sunland Manufacturing Company is trying to decide whether to continue manufacturing a part or to buy it from an outside supplier. The part, called CISCO, is a component of the company's finished product. The following information was collected from the accounting records and production data for the year ending December 31, 2022. 1.7,900 units of CISCO were produced in the Machining Department. 2. Variable manufacturing costs applicable to the production of each CISCO unit were: direct materials $5.11, direct labor $4.48, indirect labor $0.48, utilities $0.39. 3. Fixed manufacturing costs applicable to the production of CISCO were: Cost Item Direct Allocated Depreciation $2,000 $900 Property taxes 540 330 Insurance 940 560 $3,480 $1,790 All variable manufacturing and direct fixed costs will be eliminated if CISCO is purchased. Allocated costs will not be eliminated if CISCO is purchased. So if CISCO is purchased, the fixed manufacturing costs allocated to CISCO will have to be absorbed by other production departments. 4. The lowest quotation for 7,900 CISCO units from a supplier is $83.151. (a) Prepare an incremental analysis for CISCO. (Enter negative amounts using either a negative sign preceding the number eg. 45 or parentheses eg. (45)) Net Income Increase Make CISCO Buy CISCO (Decrease) Direct material Direct labor Indirect labor Utilities Depreciation Property taxes Insurance Purchase price Freight and inspection Receiving costs Total annual cost Total annual cost $ $ (b) Based on your analysis, what decision should management make? The company should O (c) Would the decision be different if Sunland Company has the opportunity to produce $3,000 of net income with the facilities currently being used to manufacture CISCO? 0 The management of Sunland Manufacturing Company is trying to decide whether to continue manufacturing a part or to buy it from an outside supplier. The part, called CISCO, is a component of the company's finished product. The following information was collected from the accounting records and production data for the year ending December 31, 2022. 1.7,900 units of CISCO were produced in the Machining Department. 2. Variable manufacturing costs applicable to the production of each CISCO unit were: direct materials $5.11, direct labor $4.48, indirect labor $0.48, utilities $0.39. 3. Fixed manufacturing costs applicable to the production of CISCO were: Cost Item Direct Allocated Depreciation $2,000 $900 Property taxes 540 330 Insurance 940 560 $3,480 $1,790 All variable manufacturing and direct fixed costs will be eliminated if CISCO is purchased. Allocated costs will not be eliminated if CISCO is purchased. So if CISCO is purchased, the fixed manufacturing costs allocated to CISCO will have to be absorbed by other production departments. 4. The lowest quotation for 7,900 CISCO units from a supplier is $83.151. (a) Prepare an incremental analysis for CISCO. (Enter negative amounts using either a negative sign preceding the number eg. 45 or parentheses eg. (45)) Net Income Increase Make CISCO Buy CISCO (Decrease) Direct material Direct labor Indirect labor Utilities Depreciation Property taxes Insurance Purchase price Freight and inspection Receiving costs Total annual cost Total annual cost $ $ (b) Based on your analysis, what decision should management make? The company should O (c) Would the decision be different if Sunland Company has the opportunity to produce $3,000 of net income with the facilities currently being used to manufacture CISCO? 0
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Part a The Incremental Analysis for CISCO is as below Make Buy Net Income IncreaseDecrease Direct Ma... View the full answer
Related Book For
Managerial Accounting Tools for business decision making
ISBN: 978-1118096895
6th Edition
Authors: Jerry J. Weygandt, Paul D. Kimmel, Donald E. Kieso
Posted Date:
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