Exercise 20-5 Schopp Inc. has been manufacturing its own shades for its table la
ID: 2444759 • Letter: E
Question
Exercise 20-5
Schopp Inc. has been manufacturing its own shades for its table lamps. The company is currently operating at 100% of capacity, and variable manufacturing overhead is charged to production at the rate of 60% of direct labor cost. The direct materials and direct labor cost per unit to make the lamp shades are $3.93 and $4.80, respectively. Normal production is 34,300 table lamps per year.
A supplier offers to make the lamp shades at a price of $13.50 per unit. If Schopp Inc. accepts the supplier’s offer, all variable manufacturing costs will be eliminated, but the $43,510 of fixed manufacturing overhead currently being charged to the lamp shades will have to be absorbed by other products.
LINK TO TEXT
LINK TO TEXT
Johnson Enterprises uses a computer to handle its sales invoices. Lately, business has been so good that it takes an extra 3 hours per night, plus every third Saturday, to keep up with the volume of sales invoices. Management is considering updating its computer with a faster model that would eliminate all of the overtime processing.
If sold now, the current machine would have a salvage value of $11,480. If operated for the remainder of its useful life, the current machine would have zero salvage value. The new machine is expected to have zero salvage value after 5 years.
Prepare an incremental analysis. (Enter negative amounts using either a negative sign preceding the number e.g. -45 or parentheses e.g. (45).)
Should the current machine be replaced?
Exercise 20-5
Schopp Inc. has been manufacturing its own shades for its table lamps. The company is currently operating at 100% of capacity, and variable manufacturing overhead is charged to production at the rate of 60% of direct labor cost. The direct materials and direct labor cost per unit to make the lamp shades are $3.93 and $4.80, respectively. Normal production is 34,300 table lamps per year.
A supplier offers to make the lamp shades at a price of $13.50 per unit. If Schopp Inc. accepts the supplier’s offer, all variable manufacturing costs will be eliminated, but the $43,510 of fixed manufacturing overhead currently being charged to the lamp shades will have to be absorbed by other products.
Explanation / Answer
Exercise 20-5 Schopp Inc. has been manufacturing its own shades for its table la
Related Questions
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.