Answered step by step
Verified Expert Solution
Question
1 Approved Answer
Current Designs faces a number of important decisions that require incremental analysis. One of Current Designs' competitive advantages is found in the ingenuity of its
Current Designs faces a number of important decisions that require incremental analysis. One of Current Designs' competitive advantages is found in the ingenuity of its owner and CEO, Mike Cichanowski. His involvement in the design of kayak molds and production techniques has led to Current Designs being recognized as an industry leader in the design and production of kayaks. This ingenuity was evident in an improved design of one of the most important components of a kayak, the seat. The "Revolution Seating System" is a one-of-a-kind, rotating axis seat that gives unmatched, full-contact, under-leg support. It is quickly adjustable with a lever-lock system that allows for a customizable seat position that maximizes comfort for the rider. Having just designed the "Revolution Seating System,"Current Designs must now decide whether to produce the seats internally or buy them from an outside supplier. The costs for Current Designs to produce the seats are as follows. $24 /unit Direct materials Variable overhead Direct labor Fixed overhead $18 /unit $20,000 $12 /unit Current Designs will need to produce 2,950 seats this year: 26% of the fixed overhead will be avoided if the seats are purchased from an outside vendor. After soliciting prices from outside suppliers, the company determined that it will cost $57 to purchase a seat from an outside vendor. (a) Your answer is partially correct. Prepare an incremental analysis showing whether Current Designs should make or buy the "Revolution Seating System." (Enter decrease in net income then enter with a negative sign preceding the number or parenthesis, eg. -15,000 or (15,000).) Net Income Increase (Decrease) Make Buy Direct Materials 0 $ Direct Labor 0 Variable Manufacturing Costs 99000 87450 115 LUULE Fixed Manufacturing Costs 0 265000 -26501 Purchase Price 0 Total Annual Cost 99000 352450 -2534 Current Designs should buy the Revolution Seating System. e Textbook and Media
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started