Apex Manufacturing Corporation is considering a significant shift in the mix of products it manufactures. The costs associated with current and proposed production schedules are shown below by category: TThe proposed production schedule will require a one-time purchase of equipment costing $180,000. No change in selling or administrative cost from their present levels is expected.
Required:
1. What type of relevant cost analysis would be appropriate in this situation (special order, make-lease-buy, etc.)? Why?
2. What role does depreciation and equipment purchase cost play in this decision?
3. What is the minimum amount that revenue would have to increase per month to justify the proposed production schedule? Ignore taxes and the time value of money.

Question

Apex Manufacturing Corporation is considering a significant shift in the mix of products it manufactures. The costs associated with current and proposed production schedules are shown below by category: TThe proposed production schedule will require a one-time purchase of equipment costing $180,000. No change in selling or administrative cost from their present levels is expected. 
Required:
1. What type of relevant cost analysis would be appropriate in this situation (special order, make-lease-buy, etc.)? Why?
2. What role does depreciation and equipment purchase cost play in this decision?
3. What is the minimum amount that revenue would have to increase per month to justify the proposed production schedule? Ignore taxes and the time value of money.

Quizplus · Accepted Answer

The Answer of Apex Manufacturing Corporation is considering a significant shift in the mix of products it manufactures. The costs associated with current and proposed production schedules are shown below by category: TThe proposed production schedule will require a one-time purchase of equipment costing $180,000. No change in selling or administrative cost from their present levels is expected. 
Required:
1. What type of relevant cost analysis would be appropriate in this situation (special order, make-lease-buy, etc.)? Why?
2. What role does depreciation and equipment purchase cost play in this decision?
3. What is the minimum amount that revenue would have to increase per month to justify the proposed production schedule? Ignore taxes and the time value of money.

Apex Manufacturing Corporation Is Considering a Significant Shift in the Mix