Questions -

Q1. Stanton Company is planning to produce 2,200 units of product in 2012. Each unit requires 3.10 pounds of materials at $5.10 per pound and a half-hour of labor at $12.80 per hour. The overhead rate is 50% of direct labor.

(a) Compute the budgeted amounts for 2012 for direct materials to be used, direct labor, and applied overhead.

(b) Compute the standard cost of one unit of product.

Q2. In Harley Company it costs $30 per unit ($19 variable and $11 fixed) to make a product that normally sells for $48. A foreign wholesaler offers to buy 3,670 units at $25 each. Harley will incur special shipping costs of $2 per unit. Assuming that Harley has excess operating capacity.

Indicate the net income (loss) Harley would realize by accepting the special order.

Q3. Vintech Manufacturing incurs unit costs of $7 ($4 variable and $3 fixed) in making a subassembly part for its finished product. A supplier offers to make 11,600 of the part at $6.10 per unit. If the offer is accepted, Vintech will save all variable costs but no fixed costs.

Prepare an analysis showing the total cost saving, if any, Vintech will realize by buying the part.

Q4. Ridley Company has a factory machine with a book value of $87,300 and a remaining useful life of 6 years. A new machine is available at a cost of $201,500. This machine will have a 6-year useful life with no salvage value. The new machine will lower annual variable manufacturing costs from $596,000 to $378,000.

Prepare an analysis showing whether the old machine should be retained or replaced.