Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

1-b. Should the company make or buy based on analysis in part (1-a)? Make Buy 2-a. Calculate the total costs and costs per drum under

image text in transcribed
image text in transcribed
image text in transcribed
1-b. Should the company make or buy based on analysis in part (1-a)? Make Buy 2-a. Calculate the total costs and costs per drum under the two alternatives. Assume that 250,000 drums are needed each year (Round "Cost Per Drum" answers to 2 decimal places.) 2-b. Should the company make or buy based on analysis in part (2a)? Make Buy 2-c. Calculate the total costs and costs per drum under the two alternatives. Assume that 5,280,000 drums are needed each year. (Round "Cost Per Drum" answers to 2 decimal places.) 2-d. Should the company make or buy based on analysis in part (2c) ? Make Buy 3. This part of the question is not part of your Connect assignment "In my oginion, we ought to stop making our own drums and accept that outside supplier's offer", said Wim Niewindt, managing director of Antikes Refining. NV, of Aruba. At a price of 126 fiorins per drum, we would be paying 10 florins less than it costs us to manufacture the drums in our owm plant. (The currency in Aruba is the fiorin, denoted by Afl.) Since we use 320.000 drums a yeac, we would save 3,200,000 florims on an annual basis;." Antiles. Refining's present cost to manufacture one drum follows (based on 320,000 drums per yeark A decision obout whether to make or buy the drums is especially important at this time, since the equipment being used to make the drums is completely worn out and must be replaced. The choices facing the company are as follows: - Alternative 1: Purchase new cquipment and continue to make the drums. The equipment would cost All4,320,000; it would have a five-year useful life and no salvage value. The compony uses stroight-line depreciation. - Alternative 2- Purchase the drums from an outside supplier af Afli26 per drum under a five-year contract. The new equipment would be more efficient than the equpment that Antilles Refining has been using and, according to the manufacturer, would reduce direct labour and variable overhead cests by 30%. The old equipment has no resale value. Supervision cost (Af15.280,000 per year) and direct materials cost per drum would not be affected by the new oqu pment. The new equipment's capocity would be 5,280,000 drums per yoar. The company has no other use for the space being used to produce the drums The company's total general company overhead would be unaffected by this decision. Required: 1-a. Caleulate the total costs and costs per drum under the two alternatives. Assume that 320.000 drums are needed each year. (Round "Cost Per Drum" answers to 2 decimal pleces.)

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Quality Auditing Note Book Journal Notes Checklist Questions Observations Evidence Log

Authors: Just Visualize It, The Quality Guy

1st Edition

1726688402, 978-1726688406

More Books

Students also viewed these Accounting questions

Question

3. Contrast relational contexts in organizations

Answered: 1 week ago

Question

2. Describe ways in which organizational culture is communicated

Answered: 1 week ago

Question

1. Describe and compare approaches to managing an organization

Answered: 1 week ago