Share
Explore BrainMass

Managerial Accounting

Please see attached file for full problem description.

1. Edgar Auto Manufacturing Company produces cars for both the American and Japanese markets. It currently manufactures the transmissions that go into the cars. Hoyotsu Corp. has offered to provide transmissions to the company for $400 each. The company now produces 5,000 cars per month and has the following costs for the manufacture of transmissions:

Direct Materials $150
Direct Labor 50
Variable Overhead 100
Fixed Overhead 150
Total Cost $450

If the transmissions are purchased, $300,000 of fixed overhead per month will be eliminated. Given that the quality of the transmissions is equivalent to those of EAM, should the company continue to manufacture or should they buy?

2. Super K is a supermarket having 3 operating divisions. An income statement for the most recent month of operations is as follows:

General Meat Produce Total

Sales $50,000 $40,000 $10,000 $100,000
Variable Costs 30,000 16,000 5,000 51,000
Fixed:
Avoidable 5,000 4,000 3,500 12,500
Common 10,000 8,000 2,000 20,000

Profit(Loss) 5,000 12,000 (500) 16,500

If Super K dropped the produce division and converted the space to a Deli with expected sales of $20,000 and variable costs of $8,000 and Direct Fixed Costs of $3,000, and assuming no effects on the general and meat divisions, what would the effect be? Show ALL your work!

3. Chuck's Chicken Company slaughters chickens and sells the parts to grocery stores, fast food outlets, and soup companies. Currently, they sell leg quarters to grocery stores @ $.30 per pound. They have been asked to separate the thighs and legs by a chain of fast food restaurants. For a standard 100 pound package of separated quarters, the chain will pay $40.00. Chuck's estimates that the additional labor and packaging costs involved are $.06 per pound. Should they continue to sell unseparated quarters to grocery stores or sell separated quarters to the fast food

Attachments

Solution Preview

1. Edgar Auto Manufacturing Company produces cars for both the American and Japanese markets. It currently manufactures the transmissions that go into the cars. Hoyotsu Corp. has offered to provide transmissions to the company for $400 each. The company now produces 5,000 cars per month and has the following costs for the manufacture of transmissions:

Direct Materials $150
Direct Labor 50
Variable Overhead 100
Fixed Overhead 150
Total Cost $450

If the transmissions are purchased, $300,000 of fixed overhead per month will be eliminated. Given that the quality of the transmissions is equivalent to those of EAM, should the company continue to ...

Solution Summary

The solution has three questions - 1. Make or buy for Edgar Auto 2. Drop a division for Super K and 3. Sell products separated or unseparated for Chuck's Chicken

$2.19