Question 1: (Total 9 Marks) Tamworth Truck manufactures part YYY used in several of its truck models. 10,000 units are produced each year with production costs as follows: Direct materials $ 45,000 Direct manufacturing labor 15,000 Variable support costs 35,000 Fixed support costs 25,000 Total costs $120,000 Tamworth Truck has the option of purchasing part YYY from an outside supplier at $11.20 per unit. If part YYY is outsourced, 40% of the fixed costs cannot be immediately converted to other uses (i.e. cannot be avoided). a. Describe avoidable costs. What amount of the YYY production costs is avoidable? b. Should Tamworth Truck outsource YYY? Why or why not? c. What other items should Tamworth Truck consider before outsourcing any of the parts it currently manufactures? Question 2: (Total 11 Marks) Tamworth Pet Corporation manufactures two models of grooming stations, a standard and a deluxe model. The following activity and cost information has been compiled: Product Number of Setups Number of Components Direct Labor Hours Standard 3 30 650 Deluxe 7 50 150 Overhead Costs $20,000 $60,000 Required: Assume a traditional costing system applies the $80,000 of overhead costs based on direct labor hours. a. What is the total amount of overhead costs assigned to the standard model? b. What is the total amount of overhead costs assigned to the deluxe model? AND, Assume an activity-based costing system is used and that the number of setups and the number of components are identified as the activity-cost drivers for overhead. c. What is the total amount of overhead costs assigned to the standard model? d. What is the total amount of overhead costs assigned to the deluxe model? e. Explain the difference between the costs obtained from the traditional costing system and the ABC system. Which system provides a better estimate of costs? Why? Question 3: (Total 13 Marks) Tamworth Company has the following information: Month Budgeted Sales March $50,000 April 53,000 May 51,000 June 54,500 July 52,500 In addition, the gross profit rate is 40% and the desired inventory level is 30% of next months cost of sales. Required: Prepare a purchases budget for April through June (one column for each month), giving total figures for the quarter in the forth column. Question 4: (Total 10 Marks) Tamworth Cabinets is approached by Ms. Jenny Zhang, a new customer, to fulfil a large one-time-only special order for a product similar to one offered to regular customers. The following per unit data apply for sales to regular customers: Direct materials $100 Direct labor 125 Variable manufacturing support 60 Fixed manufacturing support 75 Total manufacturing costs 360 Markup (60%) 216 Targeted selling price $576 Tamworth Cabinets has excess capacity. Ms. Zhang wants the cabinets in cherry rather than oak, so direct material costs will increase by $30 per unit. Required: a. For Tamworth Cabinets, what is the minimum acceptable price of this one-time-only special order? b. Other than price, what other items should Tamworth Cabinets consider before accepting this one-time-only special order? c. How would the analysis differ if there was limited capacity? Do you want your assignment written by the best essay experts? Order now, for an amazing discount.
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