(d) Blenders and food processors use the same type of electric motor and each unit requires...
Fantastic news! We've Found the answer you've been seeking!
Question:
Transcribed Image Text:
(d) Blenders and food processors use the same type of electric motor and each unit requires one electric motor that is currently purchased from an external supplier for $13.8 per unit. To meet the annual market demand for both products, currently 25,000 motors are purchased each year. Top management is now considering whether GCI should make the electric motor internally or continue to purchase from the external supplier. The management accountant has gathered the cost information for making the electric motor: Direct materials Direct labor Variable overhead $ 4 SASASA 432 $3 $2 There are two options to provide the capacity for making the electric motors: 1. Lease the needed space and equipment at a cost of $8,000 per month and spend $4,000 per month for a supervisor. No other fixed expenses are incurred. 2. Drop the air fryer product line which currently earns the company a contribution margin of $45,000 a year. The existing equipment and space can be adapted to produce the electric motors, and the direct fixed costs at the production department will remain at $63,500 per year. Dropping the air fryer product line will decrease the sales of blender by 2%. The sales of food processor will not be affected. Which course of action should GCI choose? Support your recommendation with appropriate calculations and qualitative considerations. (16 marks) (d) Blenders and food processors use the same type of electric motor and each unit requires one electric motor that is currently purchased from an external supplier for $13.8 per unit. To meet the annual market demand for both products, currently 25,000 motors are purchased each year. Top management is now considering whether GCI should make the electric motor internally or continue to purchase from the external supplier. The management accountant has gathered the cost information for making the electric motor: Direct materials Direct labor Variable overhead $ 4 SASASA 432 $3 $2 There are two options to provide the capacity for making the electric motors: 1. Lease the needed space and equipment at a cost of $8,000 per month and spend $4,000 per month for a supervisor. No other fixed expenses are incurred. 2. Drop the air fryer product line which currently earns the company a contribution margin of $45,000 a year. The existing equipment and space can be adapted to produce the electric motors, and the direct fixed costs at the production department will remain at $63,500 per year. Dropping the air fryer product line will decrease the sales of blender by 2%. The sales of food processor will not be affected. Which course of action should GCI choose? Support your recommendation with appropriate calculations and qualitative considerations. (16 marks)
Expert Answer:
Posted Date:
Students also viewed these accounting questions
-
Ms. Humphry incorporated her restaurant, Delicious Kitchen, five years ago. Accumulated earnings are $224785, current earnings are $79041, and she can show a need for $140584 of interior remodeling....
-
The Brown-Forman Cooperage in Louisville Kentucky (USA) supplies flame-charred white-oak barrels for the aging processes of various bourbon and whiskey products produced under the Brown-Forman...
-
Googles ease of use and superior search results have propelled the search engine to its num- ber one status, ousting the early dominance of competitors such as WebCrawler and Infos- eek. Even later...
-
Kindly solve both the question. Thanks in advance.Question 1Question 2 Below are the transactions for Baste SewIng Shop for March, the first month of operations. March 1 Issue common stock in...
-
WRT, a calendar year S corporation, has 100 shares of outstanding stock. At the beginning of the year, Mr. Wallace owned all 100 shares. On September 30, he gave 25 shares to his brother and 40...
-
The frame for a sign is fabricated from thin, flat steel bar stock of mass per unit length 4.73 kg/m. The frame is supported by a pin at C and by a cable AB. Determine (a) The tension in the cable,...
-
Consider an economy in which there are two types of risk-averse individuals. Type 1 risks losing \($10\) with 40 percent probability and nothing with 60 percent probability. Type 2 is in a riskier...
-
Garrison holds a controlling interest in Robertsons outstanding stock. For the current year, the following information has been gathered about these two companies: Garrison uses the cost method to...
-
Concord Corp. is considering purchasing one of two new diagnostic machines. Either machine would make it possible for the company to bid on jobs that it currently isnt equipped to do. Estimates...
-
Your client is renovating an older Victorian style home into a 2-family dwelling with one unit on the ground floor and another on the 2nd floor. There are no windows on either side of the building as...
-
A mass flow sensor measures the mass of air into an engine resulting in the following data. Mass is in [kg/min], output in [V]: M [kg/min] Output [V] M [kg/min] Output [V] M [kg/min] Output [V] 0...
-
1. Compute the sum of [29 -1] and [15]. 2. Compute the sum of [2 9 -1] and [1 5 3]. [3 14 2] [1 2 31 3. Compute the sum of A= 2 1 4 and B = 3 13 4 1 [23 41 2 5 14 5 2
-
How does a matrix organizational structure impact decision-making and accountability within a multinational corporation, and what mechanisms can be employed to mitigate the risks of ambiguity and...
-
The central bank will adjust its monetary policy interest rate settings from time to time if the following variables move significantly out of line with the levels that the bank considers...
-
Lumpkin Company sells lamps and other lighting fixtures. The purchasing department manager prepared the following inventory purchases budget. Lumpkin's policy is to maintain an ending inventory...
-
Sendelbach Corporation is a U.S.-based organization with operations throughout the world. One of its subsidiaries is headquartered in Toronto, Canada. Although this wholly-owned subsidiary operates...
-
Write electron configurations for the following ions, and determine which have noble-gas configurations: (a) Cd2+ (b) p3- (c) Zr4+ (d) Ru3+ (e) As3- (f) Ag+
-
What do the terms lead and lag mean in the context of performance measures and why is this important?
-
a) Calculate the payback period, accounting rate of return and the net present value (at 5%) for each of these proposals. (12 marks) b) From a financial perspective, recommend which project the hotel...
-
What are the main weaknesses of traditional financial performance measures?
Study smarter with the SolutionInn App