Below is Hue’s Honey costs to make 17.5 oz. bottles for its Drinks: Hue’s Honey
ID: 2431366 • Letter: B
Question
Below is Hue’s Honey costs to make 17.5 oz. bottles for its Drinks:
Hue’s Honey
Cost of Making 17.5 Ounce Bottles
Total Cost for
1,000,000 Bottles
Cost per Bottle
Direct materials
$ 85,000
$.085
Direct labor
30,000
.030
Variable factory overhead
60,000
.060
Fixed factory overhead
85,000
.085
Total costs
$ 260,000
$ .26
1.Another manufacturer (JiffyK) offers to sell Hues Honey bottles for $.25. The capacity now used to make bottles will become sluggish if the company purchases the bottles. One supervisor with a fixed cost salary of $60,000 would be removed if the bottles are purchased. Complete a schedule that compares the costs to make vs. buy the 17.5 oz. bottles. Should Hues Honey make or buy the bottles?
2.Presume Hue’s Honey can use the released facilities in another manufacturing activity that makes a contribution to profits of $75,000 or can rent out the facilities released for $55,000.
3. Prepare a schedule that compares the four alternative courses of action: Make, Buy and leave facilities idle, Buy and use facilities for other activities and Buy and rent out facilities. Which alternative would yield the lowest net cost?
Hue’s Honey
Cost of Making 17.5 Ounce Bottles
Total Cost for
1,000,000 Bottles
Cost per Bottle
Direct materials
$ 85,000
$.085
Direct labor
30,000
.030
Variable factory overhead
60,000
.060
Fixed factory overhead
85,000
.085
Total costs
$ 260,000
$ .26
Explanation / Answer
Statement showing least net costper unit of 17.5oz bottle under various Alternatives
Buy+No alternativeuse of fecilites relased
BUY+Facilities uesd for Another man'activity
BUY+Facilities are Rented out
Decission:
Working:
ManufactureBuy+No alternativeuse of fecilites relased
BUY+Facilities uesd for Another man'activity
BUY+Facilities are Rented out
TOTALCOST OF MAN"R (or)BUY 260000 250000 250000 250000 +Un aviodable fixed cost ----- 25000 25000 25000 (-)profit/rent recived ----- ------- (75000) (60000) Net TotalCost 2,60,000$ 2,75,000$ 2,00,000$ 2,15,000$ Number of units 10,00,000 1000000 10,00,000 10,00,000 Net cost per unit 0.26$ 0.275$ 0.2$ 0.215$Related Questions
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