ColorPro uses part 87A in the production of color printers. Unit manufacturing c

Question

ColorPro uses part 87A in the production of color printers. Unit manufacturing costs of part 87A are: Direct m aterials Direct labor Variable overhead Fixed overhead 4 ColorPro uses 100,000 units of 87A per year. Filbert Company has offered to sell ColorPro 100,000 units of 874 per year for 12 Refer to Figure 12-2. Should ColorPro make or buy the part? http://east.instructor.cengagenow.com/ilrn/bca/instr/test-printing/376965427/html se 4/19/2010 Quick View Page 12 of 19 a. make the part because it will save $100,000 over buying it Ob. make the part because it will save $1,100,000 over buying it Oc. buy the part because it will save $300,000 over making it Od. buy the part because it will save $100,000 over making it e. buy the part because it will save 1,100,000 over making it 30. MULTIPLE CHOICE 12-45 Delson Company produces two types of piano legs, plain and fancy, with unit contribution margins of $8 and $12, respectively Each piano leg must spend time on a special machine. The firm owns four machines that together provide 10,000 hours of machine time per year. The plain leg requires 0.25 hours of machine time, the fancy leg requires 0.5 hours of machine time. What is the contribution margin per hour of machine time for a plain leg? Oa. $2 Oc. $32 Od. $24 Oe. $12 MULTIPLE CHOICE 12-46 Delson Company produces two types of piano legs, plain and fancy, with unit contribution margins of $8 and $12, respectively Each piano leg must spend time on a special machine. The firm owns four machines that together provide 10,000 hours of machine time per year. The plain leg requires 0.25 hours of machine time, the fancy leg requires 0.5 hours of machine time. What is the contribution margin per hour of machine time for a fancy leg? Oa. $6 Oc. $12 Od. $32 Oe. $24 32. MULTIPLE CHOICE 12-47 Delson Company produces two types of piano legs, plain and fancy, with unit contribution margins of $8 and $12, respectively Each piano leg must spend time on a special machine. The firm owns four machines that together provide 10,000 hours of machine time per year. The plain leg requires 0.25 hours of machine time, the fancy leg requires 0.5 hours of machine time. How many of each type of leg must be sold to optimize total contribution margin? a. 20,000 plain legs, 10,000 fancy legs Ob. 0 plain legs: 20,000 fancy legs Oc. 10,000 plain legs; O fancy legs Od. 40,000 plain legs; O fancy legs Oe. 0 plain legs: 10,000 fancy legs

Explanation / Answer

Dear student, only one question is allowed at a time. I am answering the first question

Fixed costs are not relevant in decision making as they are sunk costs which have already been incurred by the organization and the organization has to incur these costs even if they procure from outside supplier

So, relevant costs are only the variable costs

= Direct materials + Direct labor + Variable overhead

= $8 + $2 + $1

= $11 per unit

So, saving from making internally

= (Buying price – Cost to manufacture) x Number of units manufactured

= ($12 - $11) x 100,000

= $100,000

So, as per above discussion, option a is the correct option

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