User Account

All Pages

Situational Decsisions, Financial Accounting

Assignment Help:
Your Company makes 42,000 units per year of a part it uses in the products it manufactures. The unit product cost of this part is computed as follows:

Direct material $15.00
Direct labor 18.00
Variable manufacturing overhead 4.00
Fixed manufacturing overhead 25.00
Unit product cost $62.00

An outside supplier has offered to sell the company all of these parts it needs for $51.80 a unit. If the company accepts this offer, the facilities now being used to make the part could be used to make more units of a product that is in high demand. The additional contribution margin on this other product would be $268,000 per year.
If the part were purchased from the outside supplier, all of the direct labor cost of the part would be avoided. However, $17.00 of the fixed manufacturing overhead cost being applied to the part would continue even if the part were purchased from the outside supplier. This fixed manufacturing overhead cost would be applied to the company''''s remaining products.
Required:
a. How much of the unit product cost of $62.00 is relevant in the decision of whether to make or buy the part?
b. What is the net total dollar advantage (disadvantage) of purchasing the part rather than making it?
c. What is the maximum amount the company should be willing to pay an outside supplier per unit for the part if the supplier commits to supplying all 42,000 units required each year?

Related Discussions:- Situational Decsisions

Estimate the montly sales budget, Your friend Peter is planning to set up a...

Your friend Peter is planning to set up a new business which will manufacture and sell wooden tables. The parts that make up the table consist of a wooden table top measuring 1m by

In recent years Morten Ltd, in recent years Morten Ltd, a company that manu...

in recent years Morten Ltd, a company that manufactures and markets a range of pharmaceutical products.

How to determine the depreciation, How to determine the depreciation To...

How to determine the depreciation To determine depreciation in straight-line method, take cost of the asset, less the trade-in value, and divide by the estimated years of usefu

Relevance to investors, (a) IFRS 8 Operating segments requires that segment...

(a) IFRS 8 Operating segments requires that segmental information be provided by listed entities. Clearly FGH is looking to list and hence IFRS 8 will be applicable. The disclosure

Calculate the claim under insurance policy, Calculate the claim under insur...

Calculate the claim under insurance policy: 1) What do policy limits of 200/300/100 on an automobile insurance policy mean?Your automobile insurance policy contains policy lim

Accounting adjustments to account for unpaid wages, James Bell plans to sta...

James Bell plans to stay at the Michaels Motel for one month, and he prepays his room charges. Bell arrives and begins his stay on January 21. To account for Bell's prepayment, at

Venture capital, concept meaning features scope importance origin initiativ...

concept meaning features scope importance origin initiative in india

How would errors affect the account balances, How would the following error...

How would the following errors affect the account balances and the basic accounting equation: assets = liabilities + owners' equity? How do the misstatements affect income? 1. The

Presentation and hearing-the petition, Presentation and hearing The pet...

Presentation and hearing The petition is presented to the court and must be served on the debtor at least eight days before the hearing. If the debtor wishes to oppose it he mu

Determine the internal rate of return for a project, What is the internal r...

What is the internal rate of return for a project that has a net investment of $76,000 and net cash flows of $20,507 per year for 7 years? What is the internal rate of return fo

Write Your Message!

Captcha
Order Assignment

Featured Services

Order Now

Popular Subjects

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!

Submit Assignment

Academics

Major Subjects

Majors

Get In Touch

whatsapp: +91-977-207-8620

Phone: +91-977-207-8620

Email: [email protected]

TERMS & POLICIES

HELP & SUPPORT

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