Posted: August 25th, 2016

Determine operating income for Grant Corporation as a whole if the Roach Division is dropped?

Determine operating income for Grant Corporation as a whole if the Roach Division is dropped.
b. Should the Roach Division be eliminated?
2. The management of James Industries has been evaluating whether the company should continue manufacturing a component or buy it from an outside supplier. A $200 cost per component was determined as follows:
Direct materials $ 15
Direct labor 40
Variable manufacturing overhead 10
Fixed manufacturing overhead 35
Total $100
James Industries uses 4,000 components per year. After Light, Inc., submitted a bid of $80 per component, some members of management felt they could reduce costs by buying from outside and discontinuing production of the component. If the component is obtained from Light, Inc., James’s unused production facilities could be leased to another company for $50,000 per year.
Required:
a. Determine the maximum amount per unit James should pay an outside supplier.
b. Indicate if the company should make or buy the component and the total dollar difference in favor of that alternative.
c. Assume the company could eliminate production supervisors with salaries totaling $30,000 if the component is purchased from an outside supplier. Indicate if the company should make or buy the component and the total dollar difference in favor of that alternative.
3. Baker Company produced 30,000 units and sold 28,000 units in 2011. Beginning inventory was zero. During the period, the following costs were incurred:
Indirect labor $ 60,000
Indirect materials 30,000
Other (variable overhead) 90,000
Fixed manufacturing overhead 180,000