the lowest quotation for 8 000 cisco units from a supplier is 83 231 321049

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Problem 7 2A

The management of Shatner Manufacturing Company is trying to decide whether to continue manufacturing a part or to buy it from an outside supplier. The part, called CISCO, is a component of the company’s finished product.
The following information was collected from the accounting records and production data for the year ending December 31, 2014.
1. 8,000 units of CISCO were produced in the Machining Department.
2. Variable manufacturing costs applicable to the production of each CISCO unit were:
direct materials $5.32, direct labor $4.12, indirect labor $0.45, utilities $0.43.
3. Fixed manufacturing costs applicable to the production of CISCO were:

Cost Item	Direct	Allocated
Depreciation	$1,980	$880
Property taxes	540	310
Insurance	950	580
	$3,470	$1,770

All variable manufacturing and direct fixed costs will be eliminated if CISCO is purchased. Allocated costs will have to be absorbed by other production departments.
4. The lowest quotation for 8,000 CISCO units from a supplier is $83,231.
5. If CISCO units are purchased, freight and inspection costs would be $0.37 per unit, and receiving costs totaling $1,260 per year would be incurred by the Machining Department.

Prepare an incremental analysis for CISCO. (Enter negative amounts using either a negative sign preceding the number e.g. 45 or parentheses e.g. (45).)

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ShurShot Sports Inc. manufactures basketballs for the National Basketball Association (NBA). For the first 6 months of 2014, the company reported the following operating results while operating at 80% of plant capacity and producing 119,700 units.

Amount

Sales

$4,788,000

Cost of goods sold

3,723,673

Selling

and administrative expenses

478,800


Net income		$585,527

Fixed costs for the period were cost of goods sold $1,079,500, and selling and administrative expenses $239,400.
In July, normally a slack manufacturing month, ShurShot Sports receives a special order for 10,800 basketballs at $30 each from the Greek Basketball Association (GBA). Acceptance of the order would increase variable selling and administrative expenses $0.51 per unit because of shipping costs but would not increase fixed costs and expenses.

(a)

Prepare an incremental analysis for the special order

Attachments:

1111.doc

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