Managerial accounting, accounting, Basic Statistics

Assignment Help:
The ABC Company''s old equipment for making subassemblies is worn out. The company is considering two alternatives: a) Completely replacing the old equipment with new equipment
b) Buying sub-assemblies from a reliable outside supplier, who has quoted a unit price of 1$ on a seven-year contract for a minimum of 50 000 units per year.
Production was 60 000 units in each of the past two years. Future needs for the next seven years are not expected to fluctuate outside the range of 50 000 to 70 000 units per year. Cost records for the past two year reveal the following unit costs of manufacturing the sub-assembly:
Direct material 0.30$
Direct labour 0.35$
Variable overhead 0.10$
Fixed overhead 0.25$
Total Unit Cost 1$

The fixed overhead includes 0.10$ depreciation and 0.10$ for direct departmental fixed overhead. The new equipment will cost 188 000$ and is expected to last seven years, at the end of which is estimated to have a disposal value of 20 000$. The current disposal value of the old equipment is 10 000$.
The sale representative for the new equipment has indicated that the increase in machine speeds will reduce the total of direct labour and variable overhead by 0.35$ per unit. Consider last year''s experience of one of your major competitors with identical equipment. They produced 100 000 units under operating conditions cap arable to yours and showed the following unit cost:
Direct material 0.30$
Direct labour 0.05$
Variable overhead 0.05$
Depreciation 0.24$
Other fixed overhead 0.16$
Total Unit Cost 0.80$
You have established that any idle facilities could not be put to alternative use, and that 0.05$ per unit of the old ABC unit cost is allocated fixed overhead that will be unaffected by the decision.
1) The president asks you to compare the alternatives on a total-annual-cost basis and on a-per-unit basis for annual needs of 60 000 units. Which alternative seems more attractive?
2) Would your answer change if the needs were at either end of the relevant range (50 000 units and 70 000 units) Demonstrate at what volume level ABC would be indifferent between making and outsourcing sub-assemblies.
3) What factors, other than the preceding ones, should you bring to the attention of management to assist them in making their decision? Include the considerations that might be applied to the outside supplier.

THANKS YOU SO MUCH FOR YOUR HELP.

Related Discussions:- Managerial accounting, accounting

Calorimetry, How do I calculate the temperature change of a sample?

How do I calculate the temperature change of a sample?

Answer, Would like to know answer to gametes problem

Would like to know answer to gametes problem

What is use of Advantageous , What is use of Advantageous Immediate non-fi...

What is use of Advantageous Immediate non-financial, work-related advantages accruing to the condition.

Assignment, i want you to make my buisiness statistics assignment

i want you to make my buisiness statistics assignment

Working capital, prepare an estimate of working capital requirements from t...

prepare an estimate of working capital requirements from the following information 1. project annual sales 1,00000/- 2. selling price Rs. 8/unit 3.percentage of net profit on sale

Simple Linear Regression, One measure of the risk or volatility of an indiv...

One measure of the risk or volatility of an individual stock is the standard deviation of the total return (capital appreciation plus dividends) over several periods of time. Altho

Completely randomized design, Ask question #MinimumAgency revenues. An econ...

Ask question #MinimumAgency revenues. An economic consultant was retained by a large employment agency in a metropolitan area to develop a regression model for predicting monthly a

The value of its common stock, The Washington Corp stock has a β of 1.15 an...

The Washington Corp stock has a β of 1.15 and it will pay a dividend of $2.50 next year. The expected rate of return of the market is 17% and the current riskless rate is 9%. The e

Intermediate accounting, In November and December 2010, Lane Co., a newly o...

In November and December 2010, Lane Co., a newly organized magazine publisher, received $90,000 for 1,000 three-year subscriptions at $30 per year, starting with the January 2011 i

Post-retirement health insurance, Post-retirement health insurance Some...

Post-retirement health insurance Some companies continue to provide insurance policy to workers after they have on. This one person benefit is considered to be part of the sett

Write Your Message!

Captcha
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