Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Cat Company makes 10,000 units per year of a part that it uses in the products it manufactures. The unit product cost of this part

image text in transcribed
Cat Company makes 10,000 units per year of a part that it uses in the products it manufactures. The unit product cost of this part is computed as follows: Direct Materials $13.10 Direct Labour $23.80 Variable Manufacturing Overhead $3.70 Fixed Manufacturing Overhead Unit Product Cost $63.10 An outside supplier has offered to sell the company all the parts that Cat needs for $55 a unit. If the company accepts this offer, the facilities now being used to make the part could be used to make more units of a product lhal is in high demand. The addiliunal segment margin on this other product would be $164,000 per year. If the part were purchased from the outside supplier, $18.90 of the xed manufacturing overhead cost being applied to the part would continue. QUESTION 1 Should Cat Company make the product or purchase it from the outside supplier? (Show all calculations) (6 points) QUESTION 2 What is the decision rule for this type of scenario? (1 point)

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

Advanced Financial Accounting An IFRS Standards Approach

Authors: Pearl Tan, Chu Yeong Lim, Ee Wen Kuah

4th Edition

9789814821278, 9814821276

More Books

Students also viewed these Accounting questions