Logo
Home Study Material Contact Search
AI Chat FREE
  1. business
  2. accounting
  3. futura company purchases the 63,000 starters that

Futura Company purchases the 63,000 starters that it installs in its standard line of farm...

70.2K

Verified Solution

Question

Accounting

Futura Company purchases the 63,000 starters that it installs in its standard line of farm tractors from a supplier for the price of $13.30 per unit. Due to a reduction in output, the company now has idle capacity that could be used to produce the starters rather than buying them from an outside supplier. However, the companys chief engineer is opposed to making the starters because the production cost per unit is $13.50 as shown below:
Per Unit Total
Direct materials $ 7.00
Direct labor 2.80
Supervision 1.60 $ 100,800
Depreciation 1.10 $ 69,300
Variable manufacturing overhead 0.50
Rent 0.50 $ 31,500
Total product cost $ 13.50
If Futura decides to make the starters, a supervisor would have to be hired (at a salary of $100,800) to oversee production. However, the company has sufficient idle tools and machinery such that no new equipment would have to be purchased. The rent charge above is based on space utilized in the plant. The total rent on the plant is $82,000 per period. Depreciation is due to obsolescence rather than wear and tear.
Required:
What is the financial advantage (disadvantage) of making the 63,000 starters instead of buying them from an outside supplier?

Answer & Explanation Solved by verified expert
Get Answers to Unlimited Questions

Join us to gain access to millions of questions and expert answers. Enjoy exclusive benefits tailored just for you!

Membership Benefits:
  • Unlimited Question Access with detailed Answers
  • Zin AI - 3 Million Words
  • 10 Dall-E 3 Images
  • 20 Plot Generations
  • Conversation with Dialogue Memory
  • No Ads, Ever!
  • Access to Our Best AI Platform: Flex AI - Your personal assistant for all your inquiries!
Become a Member

Other questions asked by students

Chemistry
1.2K views

Hydrogen gas, H2, reacts with nitrogen gas, N2, to form ammonia gas, NH3, according to the...

Biology
1.2K views

Food security is a complex phenomenon that exhibits itself in numerous conditions resulting from multiple causes.’...

Physics
1.2K views

In the first stage of a two-stage rocket, the rocket is fired from the launch pad...

General Management
1.2K views

What are some questions that can be asked for a market research survey for a Winery...

Biology
1.2K views

1 Genus species of bird 2 Common name 3 Protection status and habitat

Physics
1.2K views

Q33 A solid spherical conductor has charge Q and radius R It is surrounded by...

Basic Math
1.2K views

At the beginning of the year, the odometer on an SUV read 37,839 miles. At...

Calculus
1.2K views

Of all points (x,y,z) that satisfy x + 3y + 2z = 27, find the...

Accounting
1.2K views

my choice is incorrecf Thomson Corporation owns 70 percent of...

Accounting
1.2K views

Abardeen Corporation borrowed $140,000 from the bank on October 1, Year 1. The note had...

Accounting
1.2K views

Question 2 (a)IAS 12 Income Taxes details the requirements relating to the accounting treatment of...

Finance
1.2K views

Rhodes Corporation's financial statements are shown below. Rhodes Corporation: Income Statements for Year Ending December...