Eastside Company incurs a total cost of ($120,000) in producing 10,000 units of a component needed in

Question:

Eastside Company incurs a total cost of $$120,000$ in producing 10,000 units of a component needed in the assembly of its major product. The component can be purchased from an outside supplier for $$11$ per unit. A related cost study indicates that the total cost of the component includes fixed costs equal to 50% of the variable costs involved.

a. Should Eastside buy the component if it cannot otherwise use the released capacity? Present your answer in the form of differential analysis.

b. What would be your answer to requirement (a) if the released capacity could be used in a project that would generate $$50,000$ of contribution margin?

Fantastic news! We've Found the answer you've been seeking!

Step by Step Answer:

Answer rating: 100% (QA)

Answered By

Asim farooq

I have done MS finance and expertise in the field of Accounting, finance, cost accounting, security analysis and portfolio management and management, MS office is at my fingertips, I want my client to take advantage of my practical knowledge. I have been mentoring my client on a freelancer website from last two years, Currently I am working in Telecom company as a financial analyst and before that working as an accountant with Pepsi for one year. I also join a nonprofit organization as a finance assistant to my job duties are making payment to client after tax calculation, I have started my professional career from teaching I was teaching to a master's level student for two years in the evening. My Expert Service Financial accounting, Financial management, Cost accounting, Human resource management, Business communication and report writing. Financial accounting : • Journal entries • Financial statements including balance sheet, Profit & Loss account, Cash flow statement • Adjustment entries • Ratio analysis • Accounting concepts • Single entry accounting • Double entry accounting • Bills of exchange • Bank reconciliation statements Cost accounting : • Budgeting • Job order costing • Process costing • Cost of goods sold Financial management : • Capital budgeting • Net Present Value (NPV) • Internal Rate of Return (IRR) • Payback period • Discounted cash flows • Financial analysis • Capital assets pricing model • Simple interest, Compound interest & annuities

4.40+ 65+ Reviews 86+ Question Solved

Related Book For book-img-for-question