Why Choose Us?
0% AI Guarantee
Human-written only.
24/7 Support
Anytime, anywhere.
Plagiarism Free
100% Original.
Expert Tutors
Masters & PhDs.
100% Confidential
Your privacy matters.
On-Time Delivery
Never miss a deadline.
1)If you increase the number of indirect-cost pools in the company's costing system, you will definitely increase the accuracy of the costs of outputs
1)If you increase the number of indirect-cost pools in the company's costing system, you will definitely increase the accuracy of the costs of outputs.' Do you agree or disagree? Explain your answer in two points.
2)Assume a company is considering using available space to make 10,000 units of a component part that it has been buying from a supplier for a price of $42.00 per unit. The company’s accounting system estimates the following costs of making the part:
| Per Unit | 10,000 Units per Year |
||||||||
| Direct materials | $ | 19 | $ | 190,000 | |||||
| Direct labor | 12 | 120,000 | |||||||
| Variable manufacturing overhead | 2 | 20,000 | |||||||
| Fixed manufacturing overhead, traceable | 8 | 80,000 | |||||||
| Fixed manufacturing overhead, allocated | 4 | 40,000 | |||||||
| Total cost | $ | 47 | $ | 450,000 | |||||
One-half of the traceable fixed manufacturing overhead relates to a supervisor that would have to be hired to oversee production of the part. The remainder of the traceable fixed manufacturing overhead relates to depreciation of equipment that the company already owns. This equipment has 20,000 units of unused capacity, no resale value, and it does wear out through use. The allocated fixed manufacturing overhead relates to general overhead costs, such as the plant manager’s salary, lighting, heating and cooling costs, and plant insurance costs. What is the financial advantage (disadvantage) of making 10,000 units instead of buying them from the supplier?
Multiple Choice
-
$50,000
-
$(20,000)
-
$(50,000)
-
$20,000
Expert Solution
1)Increasing the number of indirect cost pools in the company's costing system will not defnitely increase the accuracy of the costs of outputs.
Explaination for the above answer :
- Existing cost pool is not - homogenous : Accuracy will increase only if increased cost pools of outputs increase in homogenity.
- Existing cost pool is homogenous : Then increasing cost pools will not result in increasing the accuracy.
Therefore, it is one of the guideline of costing system, one should increase the number of indirect cost pools untill each of these pools is more homogenous.
2)
| Make | Buy | Financial disadvantage of buying | |
| Direct materials | $190,000 | ||
| Direct labor | $120,000 | ||
| Variable manufacturing overhead | $20,000 | ||
| Fixed manufacturing overhead- Traceable | $40,000 | ||
| Cost of purchasing from outsider | $420,000 | ||
| Total cost | $370,000 | $420,000 | ($50,000) |
Answer is Option C-($50,000)
Archived Solution
You have full access to this solution. To save a copy with all formatting and attachments, use the button below.
For ready-to-submit work, please order a fresh solution below.
