Answered step by step
Verified Expert Solution
Question
1 Approved Answer
Elena Martinez is a managerial accountant at Paibec Corporation. Paibec is under intense cost competition, and Martinez was asked to evaluate whether Paibec should continue
Elena Martinez is a managerial accountant at Paibec Corporation. Paibec is under intense cost competition, and Martinez was asked to evaluate whether Paibec should continue to manufacture part MT-RF or purchase it from Marley Company in 2022. Marley had submitted a bid to supply the 36,000 MT-RF units that Paibec needs for 2022 at a price of $17.20 each. From 2021 plant records and interviews with Janice Liu, the plant manager, Martinez gathered the following information regarding Paibec's costs to manufacture 33,000 units of MT-RF in 2021: Direct materials $171,600 Direct labor 132,000 Plant space rental [fixed] 86,000 Equipment lease [fixed] 37,000 Other overhead Variable 115,830 Fixed 141,570 Total $684,000 Liu also told her that: if MT-RF was not purchased from Marley, direct material and direct labor costs per unit were more likely to be higher in 2022 by 6% and 5%, respectively, if MT-RF was purchased from Marley, $20,000 of the fixed overhead costs could be saved. if MT-RF was purchased from Marley, plant space will not have to be rented, and equipment will not have to be leased, but it will cost $8,000 and $3,000, respectively, to terminate the two contracts. Martinez estimated that 36,000 units of MT-RF would be needed in 2022. REQUIRED [ROUND ALL VARIABLE COSTS PER UNIT TO TWO DECIMAL PLACES.] If MT-RF was purchased from Marley in 2022, what would be the effect on Paibec's profits? (Note: if the buy costs are less than the make costs, enter the difference as a positive number; if the make costs are less than the buy costs, enter the difference as a negative number.]
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