What is the correct make-or-buy decision

Reference no: EM13788609

1. Neely Manufacturing Company can make 100 units of a necessary component part with the following costs:

Direct Materials $120,000
Direct Labor 25,000
Variable Overhead 45,000
Fixed Overhead 30,000

If Neely Manufacturing Company can purchase the component externally for $190,000 and only $5,000 of the fixed costs can be avoided, what is the correct make-or-buy decision?

Make and save $5,000
Buy and save $5,000
Make and save $15,000
Buy and save $15,000

2. Keller Company manufactures a product with a unit variable cost of $150 and a unit sales price of $264. Fixed manufacturing costs were $720,000 when 10,000 units were produced and sold. The company has a one-time opportunity to sell an additional 3,000 units at $210 each in a foreign market which would not affect its present sales. If the company has sufficient capacity to produce the additional units, acceptance of the special order would affect net income as follows:

Income would decrease by $162,000.
Income would decrease by $36,000.
Income would increase by $63,000.
Income would increase by $180,000.

3. The per-unit standards for direct labor are 2 direct labor hours at $15 per hour. If in producing 1,800 units, the actual direct labor cost was $48,000 for 3,000 direct labor hours worked, the total direct labor variance is

$1,800 unfavorable.
$6,000 favorable.
$3,750 unfavorable.
$6,000 unfavorable.

4. Combs Co. is planning to sell 400 hair dryers and produce 380 hair dryers during March. Each hair dryer requires 500 grams of plastic and one-half hour of direct labor. Plastic costs $10 per 500 grams and employees of the company are paid $15.00 per hour. Manufacturing overhead is applied at a rate of 110% of direct labor costs. Combs Co. has 300 kilos of plastic in beginning inventory and wants to have 200 kilos in ending inventory. How much is the total amount of budgeted direct labor for March?

$3,000
$6,000
$2,850
$5,700

Reference no: EM13788609

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