Current Designs 20-01 (Part 3) a-b (Part Level Submission) Current Designs faces a number of important decisions that require incremental analysis. One of Current Designs' competitive advantages is found in the ingenuity of its owner and CEO, Mike Cichanowski. His involvement in the design of kayak molds and production techniques has led to Current Designs being recognized as an industry leader in the design and production of kayaks. This ingenuity was evident in an improved design of one of the most important components of a kayak, the seat. The "Revolution Seating System" is a one-of-a-kind, rotating axis seat that gives unmatched, full-contact, under-leg support. It is quickly adjustable with a lever-lock system that allows for a customizable seat position that maximizes comfort for the rider. Having just designed the "Revolution Seating System,"Current Designs must now decide whether to produce the seats internally or buy them from an outside supplier. The costs for Current Designs to produce the seats are as follows. Direct materials $25 /unit Direct labor $19 /unit Variable overhead $11/unit Fixed overhead $20,000 Current Designs will need to produce 3,050 seats this year; 30% of the fixed overhead will be avoided if the seats are purchased from an outside vendor. After soliciting prices from outside suppliers, the company determined that it will cost $58 to purchase a seat from an outside vendor. (a) Your answer is correct. Prepare an incremental analysis showing whether Current Designs should make or buy the "Revolution Seating System." (Enter decrease in net income then enter with a negative sign preceding the number or parenthesis, e.g.-15,000 or (15,000).) Net Income Increase (Decrease) Make Buy Direct Materials 76250 0 76250 Direct Labor 57950 0 57950 Variable Manufacturing Costs 33550 0 33550 Fixed Manufacturing Costs 20000 14000 6000 Purchase Price 0 176900 -176900 Total Annual Cost 187750 190900 -3150 Current Designs should make the Revolution Seating System. Click if you would like to Show Work for this question: Open Show Work (b) Would your answer in (a) change if the productive capacity released by not making the seats could be used to produce income of $21,000? (Enter decrease in net income then enter with a negative sign preceding the number or parenthesis, e.g. -15,000 or (15,000).) Net Income Increase (Decrease) Make Buy Total Annual Cost $ $ Opportunity Cost Total Cost $ V Current Designs should the Revolution Seating System. Click if you would like to show Work for this question: Open Show Work Current Designs 22 a-e (Part Level Submission) Diane Buswell is preparing the 2020 budget for one of Current Designs' rotomolded kayaks. Extensive meetings with members of the sales department and executive team have resulted in the following unit sales projections for 2020. Quarter 1 Quarter 2 Quarter 3 Quarter 4 1,300 kayaks 2,100 kayaks 900 kayaks 900 kayaks Current Designs' policy is to have finished goods ending inventory in a quarter equal to 30% of the next quarter's anticipated sales. Preliminary sales projections for 2021 are 1,100 units for the first quarter and 2,100 units for the second quarter. Ending inventory of finished goods at December 31, 2019, will be 390 rotomolded kayaks. Production of each kayak requires 60 pounds of polyethylene powder and a finishing kit (rope, seat, hardware, etc.). Company policy is that the ending inventory of polyethylene powder should be 20% of the amount needed for production in the next quarter. Assume that the ending inventory of polyethylene powder on December 31, 2019, is 20,800 pounds. The finishing kits can be assembled as they are needed. As a result, Current Designs does not maintain a significant inventory of the finishing kits. employees. The polyethylene powder used in these kayaks costs $1.20 per pound, and the finishing kits cost $160 each. Production of a single kayak requires 2 hours of time by more experienced, type I employees and 3 hours of finishing time by type The type I employees are paid $19 per hour, and the type II employees are paid $16 per hour. Selling and administrative expenses for this line are expected to be $46 per unit sold plus $8,900 per quarter. Manufacturing overhead is assigned at 150% of labor costs. Prepare the production budget for this product line by quarter and in total for 2020. CURRENT DESIGNS Production Budget Q1 Q2 Q3 04 Total Click if you would like to Show Work for this question: Open Show Work LINK TO TEXT LINK TO TEXT