I need assistance with the solution to this problem. Please show all steps to so

Question

I need assistance with the solution to this problem. Please show all steps to solution thank you.

Knuger Company makes anboaerd- outboard eognes for boate C but recently Knauger received an offer to sepply the tmeice bloeks used to make the engines for s price of 3190 each Krsager's estimated costs of malsing the engne slocks baced on aset yeate costang dats ee urenty the company makes all parts for the engines Units produced Total cests 1145,0001 $16500 Direct natenals Direct labor Manufactating overhrad 0i Note thal 30% of the overhead above idranane If the engre blocks are purchased nli of the yanable ceste can be elieinstes and 20% of the fired overhead cost can be svoided The space used to prodect the tmepe blod ud to snotner sompany for $60,0 pes yeat. howevet, additional fized cost of $t5000 Will be ef the focilaies art leased In addition, ei lose theu jobs. The company esgectsx20mena dung enet geu. The production capacity will handle the increase in output without any incresne in fixedos- ute the change in proft for Kruger if it accepts the offer and buys the engine b

Explanation / Answer

Change in profit if the offer is accepted is as follows:

Particulars Total cost(1) Per unit variable cost(2)=(1)/2000 For 2500 units(3)=(2)*2500 Direct materials 145000 72.5 181250 Direct labour 165000 82.5 206250 Variable overhead 60000 30 75000 Fixed overhead 140000 140000 Total 510000 602500 Per unit cost 255 241 The unit can be bought at 190 Number of units targeted next year(a) 2500 Purchase price(b) 190 Total purchase price(c )=(a)*(b) -475000 Savings in fixed costs=140000*20%(d) 28000 Lease rent(e ) 60000 Increase in additional fixed cost(f) -15000 Variable cost avoided(g)=2500*(72.5+82.5+30) 462500 Change in profit(a)+(b)+(c )+(d)+(e )+(f)+(g) 60500

Related Questions

Navigate

• Browse (All)
• Browse I
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.