HomeworkLib
Question

Sage Company is operating at 90% of capacity and is currently purchasing a part used in...

Sage Company is operating at 90% of capacity and is currently purchasing a part used in its manufacturing operations for $15.00 per unit. The unit cost for the business to make the part is $22.00, including fixed costs, and $9.00, excluding fixed costs. If 38,797 units of the part are normally purchased during the year but could be manufactured using unused capacity, what would be the amount of differential cost increase or decrease from making the part rather than purchasing it? a. $232,782 cost decrease b. $271,579 cost increase c. $581,955 cost decrease d. $232,782 cost increase PreviousNext

business   accounting   
0 0
Add a comment Improve this question Transcribed image text
Next > < Previous
Sort answers by oldest

Homework Answers

Answer #1

Answer:

Cost would be decreased by the following amount=

= ($15 - $9) × 38797 units = $232782

Option A. is correct answer.

0 0
Add a comment
Know the answer?
Add Answer to:
Sage Company is operating at 90% of capacity and is currently purchasing a part used in...
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Log In

Sign Up

Not the answer you're looking for? Ask your own homework help question. Our experts will answer your question WITHIN MINUTES for Free.
Similar Homework Help Questions

  • Sage Company is operating at 90% of capacity and is currently purchasing a part used in...

    Sage Company is operating at 90% of capacity and is currently purchasing a part used in its manufacturing operations for $17.00 per unit. The unit cost for the business to make the part is $21.00, including fixed costs, and s12.00, excluding fixed costs. If 35,802 units of the part are normally purchased during the year but could be manufactured using unused capacity, what would be the amount of differential cost increase or decrease from making the part rather than purchasing...

  • Willy Company has been purchasing a component, Part A25 for $38.40 per unit. Willy is currently...

    Willy Company has been purchasing a component, Part A25 for $38.40 per unit. Willy is currently operating at 80% of capacity and no significant increase in production is anticipated in the near future. The cost of manufacturing a unit of Part A25 is estimated as follows: Direct materials $23.00 Direct labor 9.00 Variable factory overhead 2.24 Fixed factory overhead 6.30 Total $40.54 Should Willy Company buy part A25 externally or make them internally?  Prepare differential analysis to support your decision. If...

  • Division A currently purchases a part from outside suppliers at a cost of $15 per unit....

    Division A currently purchases a part from outside suppliers at a cost of $15 per unit. The part is also available from Division B, which has unused capacity and can produce the part at a total cost of $14 per unit, with $4 being fixed costs. If 25,000 parts are purchased by Division A at a transfer price of $12, how much would total company income increase (decrease) if Division A purchased the part from Division B?

  • Blue Company purchases sails and produces sailboats. It currently produces 1,200 sailboats per year, operating at...

    Blue Company purchases sails and produces sailboats. It currently produces 1,200 sailboats per year, operating at normal capacity, which is about 80% of full capacity. Blue purchases sails at $267 each, but the company is considering using the excess capacity to manufacture the sails instead. The manufacturing cost per sail would be $99.02 for direct materials, $84.23 for direct labor, and $90 for overhead. The $90 overhead is based on $78,000 of annual fixed overhead that is allocated using normal...

  • QUESTION 19 Wade Company is operating at 75% of its manufacturing capacity of 140,000 product units...

    QUESTION 19 Wade Company is operating at 75% of its manufacturing capacity of 140,000 product units per year. A customer has offered to buy an additional 20,000 units at $32 each and sell them outside the country so as not to compete with Wade. The following data are available: Costs at 750% capacity: Per Unit $12.00 $1.260,000 Total Direct materials Direct labor 945.000 9.00 1.575,000 $36,00 $3.780,000 Overhead (fixed and variable) Totals 15.00 In producing 20,000 additional units, fixed overhead...

  • Novak Company purchases sails and produces sailboats. It currently produces 1,290 sailboats per year, operating at norma...

    Novak Company purchases sails and produces sailboats. It currently produces 1,290 sailboats per year, operating at normal capacity, which is about 80% of full capacity. Novak purchases sails at $273 each, but the company is considering using the excess capacity to manufacture the sails instead. The manufacturing cost per sail would be $91.59 for direct materials, $85.99 for direct labor, and $90 for overhead. The $90 overhead is based on $78,100 of annual fixed overhead that is allocated using normal...

  • Gwinnett Barbecue Sauce Corporation manufactures a specialty barbecue sauce. Gwinnett has the capacity to manufacture and...

    Gwinnett Barbecue Sauce Corporation manufactures a specialty barbecue sauce. Gwinnett has the capacity to manufacture and sell 12,000 cases of sauce each year but is currently only manufacturing and selling 10,800. The following costs relate to annual operations at 10,800 cases: Total Cost   Variable manufacturing cost $129,600   Fixed manufacturing cost $49,000   Variable selling and administrative cost $32,400   Fixed selling and administrative cost $31,000 Gwinnett normally sells its sauce for $35 per case. A local school district is interested in purchasing...

  • The Machining Division is currently operating at capacity (2,000 units). Its sales and cost data are:...

    The Machining Division is currently operating at capacity (2,000 units). Its sales and cost data are: $100 $25 Selling price per unit Variable manufacturing costs per unit Variable administrative costs per unit Total fixed manufacturing overhead Total fixed administrative costs $20,000 $5,000 ernal sales of 2000 units from Machining to Assembly take place at the If the Assembly Division is currently buying from an outside supplier at $98 per unit, what will be th optimum transfer price? $7,000 increase $4,000...

  • Haver Company currently produces component RX5 for its sole product. The current cost per unit to...

    Haver Company currently produces component RX5 for its sole product. The current cost per unit to manufacture the required 50.000 units of RX5 follows. Direct materials $ 5.00 Direct labor Overhead Total costs per unit $22.00 8.00 9.00 Direct materials and direct labor are 100% variable. Overhead is 80% fixed. An outside supplier has offered to supply the 50,000 units of RX5 for $18.00 per unit. Required: 1. Calculate the incremental costs of making and buying component RX5. Total incremental...

ADVERTISEMENT
Free Homework Help App
Download From Google Play
Scan Your Homework
to Get Instant Free Answers
Need Online Homework Help?
Ask a Question
Get Answers For Free
Most questions answered within 3 hours.
ADVERTISEMENT
ADVERTISEMENT