Question
Go Solar! Manufactures portable solar panel kits for recreational use, the solar kit includes a 100 watt solar panel with a stand and charge controller.
Go Solar! Manufactures portable solar panel kits for recreational use, the solar kit includes a 100 watt solar panel with a stand and charge controller. The company currently produces the charge controller unit. A national manufacturer of charge controllers has approached Go Solar! and offered to supply them a comparable unit for $150 each. Go Solar! compiled the following cost information for the charge controller production: Per Unit Cost Total Cost (15,000 units per year) Direct materials $92 $1,380,000 Direct labour 33 495,000 Variable overhead 12 180,000 Fixed overhead, traceable1 7 105,000 Fixed overhead, common (allocated) 5 75,000 1 75% of the traceable fixed costs would be eliminated if the charge controller was outsourced a) Assuming there are no alternative uses for the capacity currently used to produce the charge controller, should the outside supplier's offer be accepted? b) Suppose that if the charge controllers were purchased, Go Power! could use the freed capacity to produce additional solar panel kits. Each solar kit would have a contribution margin of $185, including the cost of outsourcing the charge controller. The company expects to produce and sell an additional 1,000 solar kits. Should Go Solar! accept the outside supplier's offer
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