Futura Company purchases the 69,000 starters that it installs in its standard line of farm tractors...
Fantastic news! We've Found the answer you've been seeking!
Question:
![image text in transcribed](https://s3.amazonaws.com/si.experts.images/answers/2024/05/66488bcdea52d_41366488bcd7b777.jpg)
Transcribed Image Text:
Futura Company purchases the 69,000 starters that it installs in its standard line of farm tractors from a supplier for the price of $10.70 per unit. Due to a reduction in output, the company now has idle capacity that could be used to produce the starters rather than buying them from an outside supplier. However, the company's chief engineer is opposed to making the starters because the production cost per unit is $11.40 as shown below: Direct materials Direct labor Supervision Depreciation Variable manufacturing overhead Rent Total product cost Per Unit Total $ 5.00 2.50 1.70 $117,300 1.00 $ 69,000 0.70 0.50 $ 34,500 $ 11.40 If Futura decides to make the starters, a supervisor would have to be hired (at a salary of $117,300) to oversee production. However, the company has sufficient idle tools and machinery such that no new equipment would have to be purchased. The rent charge above is based on space utilized in the plant. The total rent on the plant is $89,000 per period. Depreciation is due to obsolescence rather than wear and tear. Required: What is the financial advantage (disadvantage) of making the 69,000 starters instead of buying them from an outside supplier? Futura Company purchases the 69,000 starters that it installs in its standard line of farm tractors from a supplier for the price of $10.70 per unit. Due to a reduction in output, the company now has idle capacity that could be used to produce the starters rather than buying them from an outside supplier. However, the company's chief engineer is opposed to making the starters because the production cost per unit is $11.40 as shown below: Direct materials Direct labor Supervision Depreciation Variable manufacturing overhead Rent Total product cost Per Unit Total $ 5.00 2.50 1.70 $117,300 1.00 $ 69,000 0.70 0.50 $ 34,500 $ 11.40 If Futura decides to make the starters, a supervisor would have to be hired (at a salary of $117,300) to oversee production. However, the company has sufficient idle tools and machinery such that no new equipment would have to be purchased. The rent charge above is based on space utilized in the plant. The total rent on the plant is $89,000 per period. Depreciation is due to obsolescence rather than wear and tear. Required: What is the financial advantage (disadvantage) of making the 69,000 starters instead of buying them from an outside supplier?
Expert Answer:
Posted Date:
Students also viewed these accounting questions
-
describe Jarir bookstore by providing the followings: - A brief introduction regarding the history of this brand and its main activity? - Describe how and why the brand's activity has evolved through...
-
Briefly describe how professional venture capital got started after World War II.
-
OMG Inc. has four million shares of common stock outstanding, three million shares of preferred stock outstanding, and 5,000 bonds. If the common shares are selling for $27 per share, the preferred...
-
OBrien Corporation is a midsize, privately owned, industrial instrument man ufacturer supplying precision equipment to manufacturers in the Midwest. The corpo ration is 10 years old and operates a...
-
The financial statements of ConAgra Foods, Inc.'s 2012 annual report disclose the following information. Instructions Compute ConAgra's (a) Inventory turnover and (b) The average days to sell...
-
Molten Works Ltd provides the following information about departmental consumption of allocation bases for its 3 support and 2 operating departments. Support departments Operating departments...
-
Part A: Customer Support - Amazon Customer Service Calls requiring product installation support arrive at the customer support every 3 minutes (exponential distribution). The time it takes to...
-
Jane Doe turned 40 and found out that she is loosing accommodation property of her eye. Her optometrist suggested, after examination, that she needs corrective eye glasses of power +1.1 diopters....
-
What is the corporate level strategy of Lyft ( choose between one of those: value-creating, value-neutral or value-reducing) No definition just choose the strategy among those and explain why?
-
The Impact of Flexible Work Arrangements on Employee Productivity and Job Satisfaction in a Remote Work Environment" state and defend your position about which approach to researchdeductive or...
-
DDJ Enterprises' payroll for the month of March, 2023 is shown below. Salaries and Wages for the month of March 2023 Income Taxes withheld from employees El withheld from employees CPP withheld from...
-
Q2) Create a Table which contains following information. Please consider, the Table have to setup properly in the Table design. The type filed is should be defined by a student. Vendor ID Vendor Name...
-
Comprehensive Problem 2 Part 4 and 6 Note You must complete parts 1 2 and 3 before attempting to complete part 4 and part 6 Part 5 is an optional work sheet 4 At the end of May the following...
-
Global.asax is used for: a. declare application variables O b. all other answers are wrong O c. declare global variables O d. handle application events
-
Hardwoods, Inc. purchased a tract of timber for a total cost of \($500,000\). The tract is estimated to contain 200,000 board feet of lumber once the timber is harvested. Hardwoods expects the land...
-
Match the descriptive explanation below with the correct term: 1. An exclusive right that protects an owner against the unauthorized reproduction of a specific written work. 2. The periodic write-off...
-
Rollins Co. reported the following information in its 2018 financial statements: Compute the return on assets and asset turnover for Rollins Co. in 2018. Net sales. Net income Beginning of year total...
![Mobile App Logo](https://dsd5zvtm8ll6.cloudfront.net/includes/images/mobile/finalLogo.png)
Study smarter with the SolutionInn App