[CMA Adapted] Forte Music uses ten units of Part Number S1798 each month in the
ID: 2410410 • Letter: #
Question
[CMA Adapted] Forte Music uses ten units of Part Number S1798 each month in the production of musical instruments. The unit cost to manufacturing one unit of S1798 is presented below Direct materials 4,000 Materials handling (10% of direct materials cost) 400 Direct manufacturing labor 6,000 Indirect manufacturing (200% of direct labor- 12.000 Total manufacturing cost S22,400 Materials handling represents the direct variable costs of the Receiving Department that are applied to direct materials and purchased components on the basis of their cost. This is a separate charge in addition to indirect manufacturing cost. Forte's annual indirect manufacturing cost budget is one-fourth variable and three-fourths fixed. Louis Supply, one of Forte's reliable vendors, has offered to supply Part Number S1798 at a unit price of $18,000 If Forte purchases the S1798 units from Louis, the capacity Forte used to manufacture these parts would be idle. Should Forte decide to purchase the parts from Louis, the unit cost of S1798 would A. increase by S6,400 B. decrease by S3,700 C. decrease by $5,600 D. increase by $5,300Explanation / Answer
Make Buy Incremental Direct Materials $4,000 - Materials Handling 400 - Direct Manufacturing labor 6,000 - Indirect Manufacturing (Only Variable 1/4th) 3,000 - Total Manufacturing Cost $13,400 - Purchase Cost - 18,000 Add: Materials Handling at 10% 1,800 Total Cost $13,400 19,800 $6,400 Ans is A Increase by $6,400 Note: Indirect manufacturing cost is 3/4th fixed and continue to occur, so its irrelevant Material handling at 10% is also applicable on units purchased
Related Questions
drjack9650@gmail.com
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.