Should the company make or buy the part

Assignment Help Accounting Basics
Reference no: EM133168669

Question - AJ Corp. makes a small part needed in the production of its major product. The management accountant and purchasing manager have discussed the possibility of buying this part from Worldwide Manufacturing. The following per-unit production cost data are available:

Direct material $12

Direct labour 3

Variable overhead 6

Fixed overhead (applied) 8

Total cost $29

Cost per unit to buy:

Purchase price (subject to 2% discount) $25

Freight charges 1

Total cost $26

Required -

a. If AJ always takes advantage of purchase discounts, should the company make or buy the part? Show calculations to support your answer.

b. If AJ buys the part from Worldwide, it has no alternative use of the equipment now used for this production. Thus, 40% of the fixed overhead will continue even if production of the part stops. Should the company make or buy the part? Show calculations to support your answer.

Reference no: EM133168669

Questions Cloud

How much can ivanhoe expect to receive for the sale : Ivanhoe Railroad Co. is about to issue $272,000 of 9-year bonds paying an 10% interest rate, How much can Ivanhoe expect to receive for the sale
What is tull book value of common shareholders equity : Tull's cost of common equity capital is 8% and weighted average cost of capital is 6%. What is Tull's book value of common shareholders' equity
How much goodwill will need to be recorded : Doug, Peter, and Jack have the following capital balances; $150,000, $300,000 and $320,000, respectively. How much Goodwill will need to be recorded
Allocate the joint costs using relative weight : The joint cost related to the operation was $500,000. Gold sells for $325 per ounce and copper sells for $0.85 per pound. Allocate the joint costs
Should the company make or buy the part : If AJ always takes advantage of purchase discounts, should the company make or buy the part? Show calculations to support your answer
What is a ddos attack : What is a DDoS attack? What happens during a DDoS attack and how can you prevent and/or stop it from happening
What is the dollar amount of dividends : The total return to Lee for owning the stock was 0.37. What is the dollar amount of dividends that he received for owning the stock during the year
Calculate atcs net income : Air Transport Corporation (ATC) has sales of $1,000,000; COGS of $500,000, and EBT of $200,000. The company's tax rate is 35%. Calculate ATC's Net Income
What is the cost of goods sold manufactured : The bakery has determined the cost of direct materials used to be $106,000. What is the cost of goods sold manufactured

Reviews

Write a Review

Accounting Basics Questions & Answers

  What the net cash provided by operating activities

What the net cash provided by operating activities in the statement of cash flows for the year ended December 31, 2019

  Best practices inc is a management consulting firm its

best practices inc. is a management consulting firm. its corporate division advises private firms on the adoption and

  Compute murray division b income

Interest accrued on an 8% $20,000 GIC acquired May 1, 2021, maturing April 30, 2026 $1,074. Compute Murray's Division B income for 2021

  Comparing thes two companies that are us gaap publiclt

comparing thes two companies that are u.s. gaap publiclt traded dell vs hp what is their net profit margin and debit to

  How much will you pay in total for product X

The cash discount terms are 3/10, n / 45. How much will you pay in total for product X assuming you pay for the product 8 days after the day of purchase

  What is the weighted average contribution margin percentage

Alvarez Inc. sells three products with the following results: What is the weighted average contribution margin percentage

  One of eastvacos business segments involves the

one of eastvacos business segments involves the manufacturing of three types of book binders. the profit margin on the

  Determine ratio of net sales to assets for the home depot

Problem - Ratio of net sales to assets. Determine the ratio of net sales to assets for The Home Depot for 2009 and 2008. Round to two decimal places

  Calculate value at risk

Calculate Value at Risk at the 95% level for each market, using the actual distribution of returns, that is, the historical approach

  Compute the net present value of the investment opportunity

Lander Company has an opportunity to pursue a capital budgeting project with a five-year time. Compute the net present value of this investment opportunity.

  Recognizing the computing environment

A computer programmer suddenly transported from the 1950s to the 2000s would have trouble recognizing the computing environment that had evolved just fifty years later. What dramatic changes might oc- cur in the next ten years?

  Different form of business organization-proprietorship

What form of business organization-proprietorship, partnership, or corporation-do you recommend that Natalie use for her business?

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd