Suppose that the space mohave currently uses to make the

Reference no: EM13589493

Mohave Corp. is considering outsourcing production of the umbrella tote bag included with some of its products. The company has received a bid from Willow Co. to produce 8,800 units per year for $6.5 each. Mohave has the following information about its own production of the tote bags:

Direct materials - $3
Direct labor - 1
Variable manufacturing overhead - 1
Fixed manufacturing overhead - 2
Total cost per unit - $7

Mohave has determined that all variable costs could be eliminated by dropping production of the tote bags, while 70 percent of the fixed overhead cost is unavoidable. At this time, Mohave has no specific use in mind for the space currently dedicated to producing the tote bags.
Required:

Compute the difference in cost between making and buying the umbrella tote bag.
Should Mohave buy the tote bags from Willow or continue to make them?
Suppose that the space Mohave currently uses to make the bags could be utilized by a new product line that would generate $12,000 in annual profits. Recompute the difference in cost between making and buying the umbrella tote bag.

Reference no: EM13589493

Questions Cloud

A company decided to change its inventory valuation method : a company decided to change its inventory valuation method from fifo to lifo in a period of falling prices.what would

Computer village sells computer equipment and home office : computer village sells computer equipment and home office furniture. currently the furniture product line takes up

The company has an offer from duvall valves to produce the : howell corporation produces an executive jet for which it currently manufactures a fuel valve the cost of the valve is

Please explai how the cost of inventory moves through the : please explai how the cost of inventory moves through the financial statements as inventory is purchased and sold hint

Suppose that the space mohave currently uses to make the : mohave corp. is considering outsourcing production of the umbrella tote bag included with some of its products. the

A machine with a cost of 120000 has an estimated residual : a machine with a cost of 120000 has an estimated residual value of 15000 and an estimated life of 5 years or 15000

For each semiannual period compute a the cash payment b the : heathrow issues 2500000 of 6 15-year bonds dated january 1 2013 that pay interest semiannually on june 30 and december

Database management systems can be tremendously expensive : database management systems can be tremendously expensive when taking the initial software cost database administration

The shoe outlet has paid annual dividends of 065 070 072 : the shoe outlet has paid annual dividends of 0.65 0.70 0.72 and 0.75 per share over the last four years respectively.

User Account

All Pages