Answered step by step
Verified Expert Solution
Question
1 Approved Answer
Gyro Gear loose presently manufacturers a switch that is currently used in the production of planes. The unit costs to make this switch are: Direct
Gyro Gear loose presently manufacturers a switch that is currently used in the production of planes. The unit costs to make this switch are: Direct materials $2.50 Direct Labor 3.00 0.50 Variable manufacturing overhead Fixed manufacturing overhead 4.25 Variable selling and administration costs 1.50 Fixed selling and administration costs 2.00 $13.75 The $13.75 unit cost is based on 8,000 switches produced each year that sell for $15.00 each. Fixed costs are allocated based on the basis of direct labor hours and is not avoidable. A special mould will have to be purchased for this specific order at a cost of 12,000 Gearlose is capable of producing 12,000 switches per year. An outside supplier has approached Gyro Gearlose to provide the 2,000 switches at a cost of $12.00 each and this order will not affect regular sales. Required: ALL CALCULATIONS MUST BE SHOWN A) Should the company accept the outside suppliers offer? B) Would it be different if Gyro Gearlose could make plasma displays in the space now occupied by the switch and make a profit of $3,000? C) Give two qualitative factors would influence your decision
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