Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

9-32 Make versus buy, activity-based costing, opportunity coats.Ti Weston Company produces gas grilts. This year's expected production is 20,000 units Currenty, Weston nake the side

image text in transcribed
image text in transcribed
9-32 Make versus buy, activity-based costing, opportunity coats.Ti Weston Company produces gas grilts. This year's expected production is 20,000 units Currenty, Weston nake the side buners for its grills. Each grilb includes two side bumers. Weston's management accountae rapr the foilowing costs for making 40,000 burners: $400,000 200,000 100,000 8,000 16,000 100,000 $824,000 $10.00 5,00 2.50 Direct materials Direct manufacturing labor Variable manulacturing overhead Inspection, selup, materials handing Machine rent Allocated fioed costs of plant administration, taxes, and insurance Total costs Weston has recetved an offer trom an outside vendor to supply any number of burners Weston requires at a price of $18.50 per burner. The folowing additional information is available: a. Inspection, setup, and materiats-handling costs vary with the number of batches in which the burners are produced. Weston produces burners in batch sizes of 1,000 units. Weston will produce the 40,000 units in 40 batches . Weston rents the machine it uses to make the burners. it Weston buys ail of its burners from the outside vendor, it does not need to pay rent on this machine. 1. Assume that it Weston purchases the bumers from the outside vendor, the facifity where the burners are currently made wll remain ide. On the basis of financial considerations alone, should Weston accept the outside vendor's offer at the anticipated volume ot 40,000 burners? Show your calculations 2. For this question, assume that if the burners are purchased outside, the facilities where the burners are currently made will be used to upgrade the grills by adding a rotisserie attachment. (Note: Each pril contains two burners and one rotisserie attachment) As s a consequence, the selling price of grills variable cost per unit of the upgrade would be $48, and additional tooling will be raised by $60. The costs of $200,000 per year would be incurred. On the basis of financial considerations alone, should Weston make or buy the burners, assurming that 20,000 grill are produced (and sold)? Show your calculations 2. The sales manager at weston is concerned that the estimate of 20.000 ans maps a: a t that only 16,000 grills will be sold. Production will be cut back, freeing up work sceca. Tna space p2- be used to add the rotisserne attachmenta whether Westion buys the burners or makes tnam in-house. At this lower output,Weston woll produce the burners in 32 batches of 1,000 units each. On the bess of inancial considerations alone, should Weston purchese the burners from the outside vendor? Shovw your calculations. 9-32 Make versus buy, activity-based costing, opportunity coats.Ti Weston Company produces gas grilts. This year's expected production is 20,000 units Currenty, Weston nake the side buners for its grills. Each grilb includes two side bumers. Weston's management accountae rapr the foilowing costs for making 40,000 burners: $400,000 200,000 100,000 8,000 16,000 100,000 $824,000 $10.00 5,00 2.50 Direct materials Direct manufacturing labor Variable manulacturing overhead Inspection, selup, materials handing Machine rent Allocated fioed costs of plant administration, taxes, and insurance Total costs Weston has recetved an offer trom an outside vendor to supply any number of burners Weston requires at a price of $18.50 per burner. The folowing additional information is available: a. Inspection, setup, and materiats-handling costs vary with the number of batches in which the burners are produced. Weston produces burners in batch sizes of 1,000 units. Weston will produce the 40,000 units in 40 batches . Weston rents the machine it uses to make the burners. it Weston buys ail of its burners from the outside vendor, it does not need to pay rent on this machine. 1. Assume that it Weston purchases the bumers from the outside vendor, the facifity where the burners are currently made wll remain ide. On the basis of financial considerations alone, should Weston accept the outside vendor's offer at the anticipated volume ot 40,000 burners? Show your calculations 2. For this question, assume that if the burners are purchased outside, the facilities where the burners are currently made will be used to upgrade the grills by adding a rotisserie attachment. (Note: Each pril contains two burners and one rotisserie attachment) As s a consequence, the selling price of grills variable cost per unit of the upgrade would be $48, and additional tooling will be raised by $60. The costs of $200,000 per year would be incurred. On the basis of financial considerations alone, should Weston make or buy the burners, assurming that 20,000 grill are produced (and sold)? Show your calculations 2. The sales manager at weston is concerned that the estimate of 20.000 ans maps a: a t that only 16,000 grills will be sold. Production will be cut back, freeing up work sceca. Tna space p2- be used to add the rotisserne attachmenta whether Westion buys the burners or makes tnam in-house. At this lower output,Weston woll produce the burners in 32 batches of 1,000 units each. On the bess of inancial considerations alone, should Weston purchese the burners from the outside vendor? Shovw your calculations

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

Intermediate Accounting

Authors: Steven M. Bragg

1st Edition

1642210803, 9781642210804

More Books

Students also viewed these Accounting questions

Question

2. Why do we need legislation to protect women in the workplace?

Answered: 1 week ago