eztomheducationcom Oi l o ' lill Chapter21o Saved Help Save& Exit Submit Check my work mode : This shows what is correct or incorrect for the work you have completed so far. It does not indicate completion. Return to quest 12 Problem 21.3A (Static) Make or Buy Decision (L021-1, L021-2, L021-3, LO21-4) Parsons Plumbing & Heating manufactures thermostats that it uses in several of its products. Management is considering whether to O 24 continue manufacturing the thermostats or to buy them from an outside source. The following Information is available. points 1. The company needs 80,000 thermostats per year. Thermostats can be purchased from an outside supplier at a cost of $6 per unit. 2. The cost of manufacturing thermostats is $7.50 per unit, computed as follows Direct materials S 156,000 Direct labor 132,000 Manufacturing overhead: Variable 168 , 000 Fixed 144 , 000 Total manufacturing costs 5 500,000 Cost per unit ($600,000 + 80,000 units) 5 3. Discontinuing the manufacture of the thermostats will eliminate all of the direct materials and direct labor costs but will eliminate only 60 percent of the variable overhead costs. 4. If the thermostats are purchased from an outside source, certain machinery used in the production process would no longer have to be leased. Accordingly, $9,200 of fixed overhead costs could be avoided. No other reductions will result from discontinuing production of the thermostats. Required: a-1. Prepare a schedule to determine the incremental cost or benet of buying thermostats from the outside supplier. a-2. 0n the basis of this schedule, would you recommend that the company manufacture thermostats or buy them from the outside source? Assume that if thermostats are purchased from the outside source, the factory space previously used to produce thermostats can be .--..-. .i... g ( Prev 12 of 12 Next ezto.mheducation.com C G Google Slides: Free Online Slid.. 390CC Presentation - Google... C Orange & White Cookies... M Question 12 - Chapter 21 - Co... *Course Hero G Parsons Plumbing & Heating m... + Chapter 21 i Saved Help Save & Exit Submit Check my work mode : This shows what is correct or incorrect for the work you have completed so far. It does not indicate completion. Return to question 12 b-2. Would this new assumption change your recommendation as to whether to make or buy thermostats? x Answer is not complete. 0.24 points Complete this question by entering your answers in the tabs below. Req Al Req A2 Req B1 Req B2 Prepare a schedule to determine the incremental cost or benefit of buying thermostats from the outside supplier. Make the Buy the Incremental Thermostats Thermostats Analysis Manufacturing costs for 80,000 thermostats: Direct materials O 156,000 156,000 Direct labor 132,000 132,000 Manufacturing overhead: Variable factory overhead 168,000 67,200 100,800 Fixed factory overhead 144,000 144,000 X O X Cost to purchase 48,000 X (48,000) X Totals $ 600,000 691,200 X $ (91,200) X Mc Graw Hill