Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Check my work Futura Company purchases the 73,000 starters that it installs in its standard line of farm tractors from a supplier for the price

image text in transcribed

Check my work Futura Company purchases the 73,000 starters that it installs in its standard line of farm tractors from a supplier for the price of $12.10 per unit. Due to a reduction in output, the company now has idle capacity that could be used to produce the starters rather than buying them from an outside supplier. However, the company's chief engineer is opposed to making the starters because the production cost per unit is $13.10 as shown below: 10 points Per Unit Total $ 6.00 Direct materials Direct labor Supervision Depreciation Variable manufacturing overhead Rent 3.00 1.90 $138,700 1.50 $109,500 0.60 0.60 43,800 eBook Print References Total product cost $13.10 If Futura decides to make the starters, a supervisor would have to be hired (at a salary of $138,700) to oversee production. However, the company has sufficient idle tools and machinery such that no new equipment would have to be purchased. The rent charge above is based on space utilized in the plant. The total rent on the plant is $82,000 per period. Depreciation is due to obsolescence rather than wear and tear Required What is the financial advantage (disadvantage) of making the 73,000 starters instead of buying them from an outside supplier

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

Essentials Of Xbrl Financial Reporting In The 21st Century

Authors: Bryan Bergeron

1st Edition

0471220779, 978-0471220770

More Books

Students also viewed these Accounting questions

Question

Describe the cash conversion cycle .

Answered: 1 week ago

Question

an element of formality in the workplace between different levels;

Answered: 1 week ago