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Coronado Firm is considering whether to outsource the manufacture of subcomponent JXY. The accounting department provides the following cost information for manufacturing 12,000 units of
Coronado Firm is considering whether to outsource the manufacture of subcomponent JXY. The accounting department provides the following cost information for manufacturing 12,000 units of subcomponent JXY per month. Direct materials costs $38,900 Direct labour costs 30,400 Variable overhead 16,400 Fixed overhead* 13,500 *Fixed overhead includes $4,300 supervisor's salary. International Firm agrees to supply Coronado with 12,000 units per month for a total cost of $137,700. If subcomponent JXY is outsourced, Coronado will be able to increase the production and sales of its final product by 1,070 units per month; the product is sold for $120 per unit and its average variable costs per unit are $80. The supervisor's salary will be eliminated if subcomponent JXY is outsourced. (a) Prepare an incremental analysis for subcomponent JXY. (If an amount reduces the incremental costs then enter with a negative sign preceding the number e.g. -15,000 or parenthesis, e.g. (15,000). While alternate approaches are possible, irrelevant fixed costs should be included in both options when solving this problem.) Incremental Costs (Savings) Make Buy $ $ $ Cost of good sold Manufacturing overhead Direct materials Purchase price Variable overhead Opportunity cost Cost of good soldManufacturing overhead Total monthly cost Direct labour Fixed overhead Save for Later Attempts: 0 of 2 used Submit Answer (b) The parts of this question must be completed in order. This part will be available when you complete the part above. (c) The parts of this question must be completed in order. This part will be available when you complete the part above
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