Chapter $13$ Inclass Problems

The Floyd Corporation has been buying $20,000$ units of one of its component parts for $$10\mathrm{.}50$ per part. Management is currently trying to decide whether to continue this practice or begin manufacturing the part. The manufacturing department estimates the following expenses associated with manufacturing each part:

Direct materials

Direct labor

Variable overhead

$$5\mathrm{.}00$

$$1\mathrm{.}50$

$$2\mathrm{.}00$

The manufacturing department also estimates that an additional $$16,000$ of annual fixed costs would be incurred if the part is produced. Should Floyd continue to purchase this part or manufacture the part itself?

$2.$ From a particular joint process, Watson Company produces three products: X$,$ Y$,$ and Z$.$ Each product may be sold at the split$-$off point or processed further. Additional processing requires no special facilities and production costs of further processing are entirely variable and traceable to the products involved. In $2018,$ all three products were processed beyond the split$-$off point. Joint costs for the year were $$60,000.$ Sales values and costs needed to evaluate Watsons' $2018$ production policy follow:

Joint costs are allocated to the products using the physical measures approach. Prepare an incremental analysis to determine which products should be processed further.

$3.$ Bearkat Company can produce either of two models of a product. Selected information on each product is as follows:

If only $30,000$ labor hours are available for production, which model is preferable and how much should be sold assuming unlimited demand?

$1$