Ask Question, Ask an Expert

+1-415-315-9853

info@mywordsolution.com

Ask Accounting Basics Expert

Eradicate, Inc. produces and sells a line of insect repellants that are sold primarily in the summer months. Recently, the chief operating officer has become interested in possibly manufacturing a repellant, "Halt" that can prevent a person from being attacked by use of a "pepper" repellant. The appeal of this product is that it would have year-round sales and would help stabilize the income of the company. The product, however, must be sold in a specially designed spray can the will be sold in cartons that hold 24 cans of the repellant. The sales price will be $96 per carton. The plant is now operating at only 65% of its total capacity, so no additional fixed costs will be incurred. However, a $100,000 fixed overhead charge will be allocated to the new product from the company's present total of fixed costs. Using the current estimates for 100,000 cartons of "Halt" as a standard volume, the following costs were developed for each carton, including the cost of the can:

Direct materials $12
Direct labor 6
Overhead (includes allocated fixed charge) 4
Total cost per carton $22

Eradicate, Inc., has requested a bid from a manufacturer of specialty dispensers for a purchase price of an empty can that could be used for the new product. The specialty company offered a price of $5 for a carton of cans. If the proposal is accepted, Eradicated, Inc., estimates that direct labor and variable overhead costs would be reduced by 10% and indirect material would be reduced by 20%.

Required:

1. Should Eradicate make or buy the special cans? (Hint: First compute the costs that could be saved by buying the cans.)

2. What would be the maximum purchase price acceptable to Eradicate for the cans?

Accounting Basics, Accounting

  • Category:- Accounting Basics
  • Reference No.:- M946152

Have any Question? 


Related Questions in Accounting Basics

During the year mr ashok sold his private car for 50000 and

During the year mr. ashok sold his private car for 50000 and this amount invested in business he withdraw from business 1500 per month up to july 31st 2011 and thereafter 4500 per month as Drawing you are required to pre ...

Assignment ethical issue reclassification of

Assignment: Ethical Issue: Reclassification of Receivables Respond to the following ethical issue concerning the reclassification of receivables in your initial post: Moss Exports is having a bad year. Net income is only ...

Assignment case studyreqiredassume you are employed as a

Assignment Case Study Reqired Assume you are employed as a graduate tax accountant and have been asked to detail to your manager, the Australian income tax implications of the following facts relating to Mrs Gilling, who ...

Question 1 accounting equation determine the missing amount

Question 1: Accounting Equation Determine the missing amount in each of the following cases:    Assets                          Libilities              stockholders' Equity a. $200,000                     $85,000         ...

Oregon corporation has filed a voluntary petition to

Oregon Corporation has filed a voluntary petition to reorganize under Chapter 11 of the Bankruptcy Reform Act. Its creditors are considering an attempt to force liquidation. The company currently holds cash of $13,000 an ...

Enter the given transactions in the bank account in ajays

Enter the given transactions in the bank account in Ajay's ledger 1 The owner started her business with a capital contribution of N$25 000 which she deposited in the business' bank account 3. Purchased stationary, N$140 ...

Financial accounting assignment-part 1 - task detailsmonash

Financial Accounting Assignment- Part 1 - Task details: Monash Cow Ltd operates dairy farms across different locations of Victoria. Since the start of its operation in 1981, the firm's business has been rapidly growing a ...

Accounting principles assignment-q1 smith catering service

Accounting Principles Assignment- Q1. Smith Catering Service completed the following transactions during its first month of operations for July 2016: a. Smith Catering Service commenced operations by receiving $12000 cas ...

Part problema retail company had the following merchandise

PART: Problem A retail company had the following merchandise inventory activity for its widget product line during the current monthly period. * For Specific ID, 50 units were sold from the beginning inventory; 100 from ...

Why do organizations have internal audits compliance audits

Why do organizations have internal audits, compliance audits, or operational audits performed? Provide examples of what type of organization might have each of these audits and for what purpose? Who would want this infor ...

  • 4,153,160 Questions Asked
  • 13,132 Experts
  • 2,558,936 Questions Answered

Ask Experts for help!!

Looking for Assignment Help?

Start excelling in your Courses, Get help with Assignment

Write us your full requirement for evaluation and you will receive response within 20 minutes turnaround time.

Ask Now Help with Problems, Get a Best Answer

A cola-dispensing machine is set to dispense 9 ounces of

A cola-dispensing machine is set to dispense 9 ounces of cola per cup, with a standard deviation of 1.0 ounce. The manuf

What is marketingbullwhat is marketing think back to your

What is Marketing? • "What is marketing"? Think back to your impressions before you started this class versus how you

Question -your client david smith runs a small it

QUESTION - Your client, David Smith runs a small IT consulting business specialising in computer software and techno

Inspection of a random sample of 22 aircraft showed that 15

Inspection of a random sample of 22 aircraft showed that 15 needed repairs to fix a wiring problem that might compromise

Effective hrmquestionhow can an effective hrm system help

Effective HRM Question How can an effective HRM system help facilitate the achievement of an organization's strate