Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Assume a company is considering buying 10,000 units of a component part rather than making them. A supplier has agreed to sell the company

image text in transcribedimage text in transcribed

Assume a company is considering buying 10,000 units of a component part rather than making them. A supplier has agreed to sell the company 10.000 units for a price of $40 per unit. The company's accounting system reports the following costs of making the part: Direct materials Direct labor Variable manufacturing overhead Fixed manufacturing overhead, traceable Fixed manufacturing overhead, allocated Total cost Per 10,000 Units Unit per Year $18 $ 180,000 12 120,000 2 20,000 8 4 80,000 40,000 $ 44 $ 440,000 One-half of the traceable fixed manufacturing overhead relates to supervisory salaries and the remainder relates to depreciation of equipment with no salvage value. If the company chooses to buy this component part from a supplier, then the supervisor who oversees its production would be discharged. If the company begins buying the part from a supplier, it can use freed up capacity to produce and sell 2.100 more units of another product that eams a contribution margin per unit of $7.75 What is the financial advantage (disadvantage) of buying 10,000 units from the suppiller?

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

Cornerstones of Managerial Accounting

Authors: Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger

6th edition

1305103963, 978-1305548909, 1305548906, 978-1305103962

More Books

Students also viewed these Accounting questions

Question

Convert 0111 1111 from binary to decimal notation.

Answered: 1 week ago