Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Brees, Inc., a manufacturer of goif carts, has just received an offer from a supplier to provide 2,600 units of a component used in its

image text in transcribed
image text in transcribed
Brees, Inc., a manufacturer of goif carts, has just received an offer from a supplier to provide 2,600 units of a component used in its main product. The component is a track assembly that is crrently produced internally. The supplier has offered to sell the track assembly for $66 per unit. Brees is currently using a traditional, unit-based costing system that assigns overhead to jobs on the basis of direct labor hours. The estimated traditional full cost of producing the track assembly is as follotvs: Prior to making a decision, the company's CEO commissioned a special study to see whether there would be any decrease in the fixed overhead costs. The results of the study revealed the following: 3 setups - $1,160 each (The setups would be avoided, and total spending could be reduced by $1,160 per setup.) One half-time inspector is needed. The company already uses part-time inspectors hired through a temporary employment agency. The yearly cost of the part-time inspectors for the track assembly operation is $12,300 and could be totally avoided if the part were purchased. One half-time inspector is needed. The company already uses part-time inspectors hired through a temporary employment agency. The yearly cost of the part-time inspectors for the track assembly operation is $12,300 and could be totally avoided if the part were purchased. Engineering work: 470 hours, $45 /hour. (Although the work decreases by 470 hours, the engineer assigned to the track assembly line also spends time on other products, and there would be no reduction in his salary.) 75 fewer material moves at $30 per move. Required: 1. Ignore the special study, and determine whether the track assembly should be produced internally or purchased from the supplier. 2. Now, using the special study data, repeat the analysis. 3. Discuss the qualitative factors that would affect the decision, including strategic implications. 4. After reviewing the special study, the controller made the following remark: "This study ignores the additional activity demands that purchasing would cause. For example, although the demand for inspecting the part on the production floor decreases, we may need to inspect the incoming parts in the receiving area. Will we actually save any inspection costs?" Is the controller right? 5. Briefly discuss how the use of various forms of graphical representation (i.e., data visualization) to communicate the results of the special study might impact how the CEO (or other interested parties within the company) use them in making the final make-or-buy decision

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

Benfords Law

Authors: Mark J. Nigrini

1st Edition

1118152859, 9781118152850

More Books

Students also viewed these Accounting questions

Question

in a workplace is another big issue that is commonly overlooked.

Answered: 1 week ago