Show Time Company currently manufactures the hands it uses in the assembly of grandfather clocks. Cost estimates to make each set of hands are as follows:

Pikechimatepials:cst2 ees dln a es Mette Re aes $ 8.00 per set EVE AB i panes ses sacs sce seascatoassaaane tl covassdiasten sesbaranesMiasenionstantastetohste Motucsanlewtioes 4.00 per set WAGIADIESOV ETI CAG secteccracncen caans hase seas nsss Psexrtt at ios Nescartesecse PAA eoasheamoacte 2.00 per set BAX OVCTSACAG gfe sresrscretaesasscrsscrcas pois sp aasti-sectee emeaeasPis coe aaa gesre acc ists eerotsee $13,000 per year Required: (1) Prepare an analysis to answer each of the following independent questions.

(a) Assume that all variable costs are avoidable and that the company needs 4,000 sets of hands annually. How much of the fixed overhead must be avoidable in order for the company to prefer to buy the sets from an outside supplier at $17 per set instead of continuing to make them?

Assume that all variable costs are avoidable, that the company needs 4,000 sets of hands annually, and that only $6,000 of fixed costs are avoidable. Below what purchase price per set of hands would the company prefer to buy the components from an outside supplier instead of continuing to make them?

(c) Assume that all variable costs are avoidable, that $3,000 of fixed overhead is avoidable, and that the purchase price of a set of hands is $20.

Below what number of sets needed would the company prefer to buy the sets of hands from an outside supplier instead of continuing to

(b —S make them?

(2) Suppose fixed overhead costs include the following:

REISER eT Te eee renee ee eerste eee ees $ 5,000 Depreciation, Equipment. ccescssassssssscorssossvsscsvsssarssoossososnvossssisonssooruvosonscens 3,600 PROPEL ty CAXGSisfarutssreectecrlstesatocateapaccaseraa leasae dabadenstevsssvaveppastesstcsasiosh tess ciet 300 FGI iat SRSA AIGY ctecrcestasatnat ati es Meas copazeagiras oaszcasebsecsshsserspt soset oo sceacibssanats 3,000 FROUGI IG INAIITLOMI AICO aceatesteanssarepsedscastoes oUiscusseaMe cossariarstseuatassPoocascpssaatness 600 MOSER AIS merncmnnerestaactcceenecearneaa case sceseanenaceaeMtacios caters aBiMcassicasesci sistent icasausanatss 500 List the fixed costs that you think Show Time could avoid (at least partially) if it purchased sets of hands. What are your reasons for including each of these costs on the list? TYK-1