Coboard Alignment Number Make or Buy Allen Corporation currently makes the nylon convertible top for its main product, a fiberglass boat designed especially for water skiing. The costs of producing the 1,500 tops needed each year follow Nylon fabric Aluminum tubing 270,000 96,000 24,000 162,000 30.000 180,000 Direct labor Variable manufacturing overhead Fixed manufacturing overhead 10 12 Dustin Company, a specialty fabricator of synthetic materials, can make the needed tops of comparable 13 quality for $390 each, F.O.B shipping point Allen would furnish its own trademark insignia at a unit 14 cost of $12. Transportation would be 518 per unit, paid by Allen Corporation 15 1 16 Allen's chief accountant has prepared a cost analysis that shows that only 20% of fixed overhead 17 could be avoided if the tops are purchased. The tops have been made in a remote section of Allen's 18 factory building using equipment for which no alternate use is apparent in the foreseeable future 20 Required 21 Prepare a differential analysis showing whether or not you would recommend that the convertible 122 tops be purchased from Dustin Company Assuming that the production capacity released by purchasing the tops could be devoted to a subcontracting job for another company that natted contribution margin of 5-12.000, what maximum purchase price could Allen Corporation pay for the tops? de portant qutive factors that A b oration should consider in deciding ether to purchase the needed tops 31 30 a. Cost of purchasing tops: Purchase price 32 Insignia to be furnished 33 Transportation 34 Total unit cost of purchasing 35 Number to be purchased 36 Total cost of purchased tops Cost avoided by purchasing tops: Nylon fabric Aluminum tubing Frame fittings Direct labor Variable manufacturing overhead Fixed manufacturing overhead Total cost avoided Disadvantage of purchasing 46 47 b. Maximum purchase price to be paid: Cost avoided through purchasing (see al P8-3A 48 Fixed manufacturing overhead Total cost avoided Disadvantage of purchasing 17 b. Maximum purchase price to be paid Cost avoided through purchasing (see a.) Contribution margin on released capacity Less: Cost of insignia Transportation 55 Total potential savings available for purchase price Maximum per unit purchase price OLD LEIF G Make or Buy Allen Corporation currently makes the nylon convertible top for its main product, Fiberglass boat designed especially for water skiing. The costs of producing the 1500 tops needed each year follow: Nylon Fabric Aluminum tubing Frame fittings Direct labor Variable manufacturing overhead Fired manufacturing overhead $ 270,000 96,000 24.000 152.000 30,000 180.000 Dustin Company, a specialty fabricator of synthetic materials, can make the needed tops of comparable 3 quality for $390 each, FOB shipping point Alen would furnish its own trademark insignia at sunt cost of $12. Transportation would be $18 per unit paid by Allen Corporation 6 Allen's chief 20countant has prepared a cost analysis that shows that only 20% of Fined overhead 7 could be avoided if the tops are purchased. The tops have been made in a remote section of Allen's 18 factory building, using equipment for which no alternate use is apparent in the foreseeable future. 20 Required 21 Prepare a differential analysis showing whether or not you would recommend that the convertible tops be purchased from Dustin Company 23 b Assuming that the production capacity released by purchasing the tops could be devoted to a 24 subcontracting job for another company that netted a contribution margin of $42,000, what maximum 25 purchase price could Allen Corporation pay for the tops? 26 Identify two important qualitative factors that Allen Corporation should consider in deciding whether to purchase the needed tops. 28 29 30 Cost of purchasing tops: Purchase price Insignia to be furnished Transportation Total unit cost of purchasing Number to be purchased Total cost of purchased tops Costwolded by purchasing tops: Nylon Fabric Aluminum tubing Frames Delabor Variable manufacturing overhead Towded Did e o purchasing Ma p acha pace to be paid Cost voded to purchasing see aj