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Question 4.
Question :
(TCO 6) At Long Co., electricity cost
starts with a minimum fixed cost, and after that, there is a perfectly
variable expense. Using estimated machine hours:
Machine hours
50,000
60,000
Cost
$102,000
$122,000
What is the a) estimated variable cost per machine hour and what is the
b) estimated TOTAL fixed cost?
Question 5.
Question :
(TCO 7) North Company produces a
small part that it uses in the production of its Product "H". The
company's unit product cost for the part, based on a production of
100,000 parts per year, is as follows:
.................................................Per part ....................Total
parts to the North Company for only $21.25 per part.(it appears to the
President of the company that he could save $2.75 per unit.
100 percent of the traceable or avoidable fixed manufacturing cost is
supervisor salaries and other costs that can be ELIMINATED if the parts
are purchased. The decision to buy the parts from the outside supplier
would have no effect on the common fixed costs of the company, and
the space being used to produce the parts would otherwise be idle.
Ignore the impact of income taxes in your calculation.
How much would profits increase or decrease as a result of purchasing
the parts from the
outside supplier rather than making them inside the company?