1. Warrior Company needs a new processing machine. The company is considering 2 different machines: machine 0178 and machine 2216. Machine 0178 costs $20,000 and will reduce operating costs by $5,000 per year. Machine 2216 costs $15,000 and reduces operating costs by $3,000 per year. Compute the payback for each machine and determine which should be selected using the payback method. (show your work).
2. Austin LTD. Manufactures a component that is used in the fans it produces. A supplier has offered to supply the component for $25 per part. The annual requirements of Austin are 20,000 components. Austin's cost detail of manufacturing the component is as follows:
|
per unit
|
|
|
|
|
|
direct materials
|
$9
|
|
direct labor
|
$5
|
|
variable overhead
|
$1
|
|
depreciation of equipment
|
$3
|
|
supervisor's salary
|
$2
|
|
general factory overhead
|
$10
|
|
total
|
$30
|
It was determined that the special equipment has no resale value and cannot be used for another process. The factory overhead is an allocation and would be unaffected by the decision. The costs above are based on the same 20,000 units that the supplier would supply.
Should Austin continue to manufacture the component or purchase it from the outside supplier? (support your work with numbers).
Austin LTD. Manufactures a component that is used in the fans it produces. A supplier has offered to supply the component for $25 per part. The annual requirements of Austin are 20,000 components. Austin's cost detail of manufacturing the component is as follows:
|
per unit
|
|
|
|
|
|
direct materials
|
$9
|
|
direct labor
|
$5
|
|
variable overhead
|
$1
|
|
depreciation of equipment
|
$3
|
|
supervisor's salary
|
$2
|
|
general factory overhead
|
$10
|
|
total
|
$30
|
It was determined that the special equipment has no resale value and cannot be used for another process. The factory overhead is an allocation and would be unaffected by the decision. The costs above are based on the same 20,000 units that the supplier would supply.
Should Austin continue to manufacture the component or purchase it from the outside supplier? (support your work with numbers).
Austin LTD. Manufactures a component that is used in the fans it produces. A supplier has offered to supply the component for $25 per part. The annual requirements of Austin are 20,000 components. Austin's cost detail of manufacturing the component is as follows:
|
per unit
|
|
|
direct materials
|
$9
|
|
direct labor
|
$5
|
|
variable overhead
|
$1
|
|
depreciation of equipment
|
$3
|
|
supervisor's salary
|
$2
|
|
general factory overhead
|
$10
|
|
total
|
$30
|
It was determined that the special equipment has no resale value and cannot be used for another process. The factory overhead is an allocation and would be unaffected by the decision. The costs above are based on the same 20,000 units that the supplier would supply.
Should Austin continue to manufacture the component or purchase it from the outside supplier? (support your work with numbers).
Sherri is going to Chicago to see her friend Ryan. She is trying to decide which is cheaper, driving or riding the train. Following is a list of costs that Sherri has compiled in relation to the trip.
Identify which costs are relevant (R).
________ Annual straight line depreciation on the car
_______ Cost of gasoline
________ Annual cost of auto insurance and license fee
________ Maintenance and repairs
_________ Parking fees at home
_______ Cost of train ticket
________ Reduction in resale value of car due to mileage used and wear and tear
_________ Cost of putting dog in kennel while she is gone
________ Cost of parking car in Chicago