2. high-glow currently produces 1,000 bicycles per month. the following per unit data apply for sales to regular customers: direct materials $50 direct manufacturing labor 5 variable manufacturing overhead 14 fixed manufacturing overhead 10 total manufacturing costs $79 the plant is experiencing demand shortage and is considering reducing production to 800 bicycles. what is the per unit cost of producing 800 bicycles? a) $79 per unit b) $81.50 per unit c) $74 per unit d) $69 per unit

It is better to make the wheels

Explanation:

Sarasota Bicycles

Incremental Analysis

                                            Make             Buy

Direct materials                 $3.00

Direct labor                        $3.60

Variable OH (3.06*30%)    1.08

Total                                   7.68                  8

Normal production  200,000                    200,000

Total Costs                    1536000            1600,000

Fixed Overheads         84,000                 84,000      

Total Costs                   1620,000             1684,000  

As fixed costs are irrelevant costs that would not change whether the company makes or buys wheels and the cost to make the wheels $7.08 is less than the cost to buy $ 8.0. It is better to make the wheels . Buying the wheels from the outside supplier  is costly.

(a) DM

(b) DL

(c) MO

(d) MO

Explanation:

(a)  Frames and tires used in manufacturing bicycles.

This is cost directly related to the materials used in manufacturing a product and, thus, should be classified as a direct material cost (DM).

(b) Wages paid to production workers.

This cost is directly related to pay for the labor required to manufacture a product and, thus, should be classified as a direct labor cost (DL).

(c) Insurance on Factory equipment and machinery.

Although this is a cost incurred from manufacturing, it can't be directly linked to either materials or labor since it is an structural cost and, therefore, should be classified as a manufacturing overhead cost (MO).

(d) Depreciation on factory equipment

For the same reason as the previous item, this should be classified as a manufacturing overhead cost (MO).

a. Metal used for rims: Product - DM- Prime

b. Sales salaries: Period - Selling

c. Rent on factory: Product - MOH - Conversion

d. Wages of assembly workers: Product - DL - Prime - Conversion

e. Salary of production supervisor: Period - Admin

f. Depreciation on office equipment: Period

g. Salary of CEO: Period - Admin

h. Delivery expense: Period - Selling

Explanation:

- Direct materials are those materials and supplies that are consumed during the manufacture of a product, and which are directly identified with that product.

- Direct labor is production or services labor that is assigned to a specific product, cost center, or work order.  

- Manufacturing overhead refers to indirect factory-related costs that are incurred when a product is manufactured.

- Period costs are not directly tied to the production process. Overhead or sales, general, and administrative (SG&A) costs are considered period costs. SG&A includes costs of the corporate office, selling, marketing, and the overall administration of company business.

- Product costs are the direct costs involved in producing a product. A manufacturer, for example, would have production costs that include: Direct labor, Raw materials, Manufacturing supplies, Overhead that's directly tied to the production facility such as electricity.

- Prime cost= direct material + direct labor

- Conversion cost= direct labor + MOH

In this exercise:

a. Metal used for rims: Product - DM- Prime

b. Sales salaries: Period - Selling

c. Rent on factory: Product - MOH - Conversion

d. Wages of assembly workers: Product - DL - Prime - Conversion

e. Salary of production supervisor: Period - Admin

f. Depreciation on office equipment: Period

g. Salary of CEO: Period - Admin

h. Delivery expense: Period - Selling

a. The preparation of schedule that shows the differential costs is shown below:-

b. Decision : Make

Explanation:

ParticularsMake the  Buy from                      Differential      

                      Wheels          trailblazers           cost            

Offer of

trailblazer                            $220,000       $220,000    Higher

                                           (2,000 × $110)

Material cost  $50,000                               $50,000   Lower

                      ($25 × 2,000)

Labor cost      $106,000                              $106,000   Lower

                     ($53 × 2,000)

Variable

overhead     $32,000                                  $32,000     Lower

                    ($16 × 2,000)

Fixed

overhead    $94,000          $54,000           $40,000      Lower

                  ($47 × 2,000)  ($94,000 - $40,000)

Total cost   $282,000     $274,000             ($8,000)     Lower

Working Note:-

1) Fixed overhead applied = $47 × 2,000 = $94000

Decision : Make

Total saving from accepting the accepting the offer of trailblazer = $8,000

Cost saving required to accept the offer of trailblazer = $10,000

Decision - Make (Since actual savings are less than savings required by $2,000)

Explanation:

Given

apparent frequency is 1 % lower than the original frequency

Speed of sound

suppose f is the original frequency  

apparent frequency

using Doppler's formula

where  

=apparent frequency  

=velocity of sound in the given media

=velocity of source

=velocity of observer  

Flounder should buy.

Relevant cost  of making  $ 74,730

Relevant of buying              $58,100

Explanation:

Relevant cost are future incremental cash cost that arise as a direct consequence of a decision.

The relevant costs of making the tires internally are

                                                             $

Variable cost of making

(3+4+1)×  5,810                                       46,480

Incremental fixed cost                      =  28,250

Total relevant cost                               74,730

Relevant cost of buying

External cost × units  = 10× 5,810   =    $58,100

Flounder Rides should buy as this will save it  $16630  i. e (74,730 - 58100)

It is cheaper to buy the seats.

Explanation:

Giving the following information:

The company is currently operating at 100% capacity, and variable manufacturing overhead is charged to production at the rate of 60% of direct labor cost. The direct materials and direct labor cost per unit to make the bicycle seats are $8.00 and $9.00, respectively. Normal production is 50,000 bicycles per year. A supplier offers to make the bicycle seats for $21 each. If the bicycle company accepts this offer, all variable manufacturing costs will be eliminated, but the $30,000 of fixed manufacturing overhead currently being charged to the bicycle seats will have to be absorbed by other products.

Make in house= [8 + 9 + (9*0.6)]*50,000= $1,120,000

Buy= 21*50,000= $1,050,000

It is cheaper to buy the seats.

Speed = distance/time

The distance is 1 mile, and the she gets there in 4 minutes

1/4 = 0.25

There are 60 minutes in a hour, so multiply the two numbers

speed = 0.25 x 60

speed = 15

15 is your answer

hope this helps

Total relevant cost:

Make = $ 14.15 each

Buy    = $12 each

Explanation:

Total Relevant Cost : Buy

Is the Purchase Price

= $12 each

Total Relevant Cost : Make

Is the Manufacturing costs and other related costs to manufacture.

Direct materials                                 $3.00

Direct labor                                        $5.00

Variable manufacturing overhead    $1.00

Fixed expensed ($29,910/  5,810)    $5.15

Total                                                   $ 14.15

= $ 14.15 each