highpoint blackboard.com Ch 21- Problems 0 Saved 2 Parsons Plumbing &Heating manufactures thermostats that it uses in several of its products. Management is considering whether to continue manulacturing the thermostats or to buy them from an outside source. The following information is avalable. 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 themmostats is $750 per unit, computed as follows 5 pots Direct naterials sreet labor Nanufacturing overhead 356,00 12,09 lock Variable 14,000 144,000 Fixed Tetal manufacturing com Ava cost per unit (3400,000-e, 000 t 7.50 Prits 3. Discontinuing the manufacture of the thermostats will eliminate all of the direct materials and direct labor costs but will elliminate- only 60 percent of the variable overhead costs 4.the thermostats are purchased from an outside source, cetain machinery used in the production process would no longer have to be leased Accondingly, $9,200 of faed overhead costs could be avoided No other neductions will result from discontinuing production of the thermostats eteences Required re a schedule to determine he incremental cost or beneft of buying thermostats fhom the outside suppler a0nhe basis of this schedule, would you recommend that the company manufacture thermostats or buy em trom the outside source? Assume that thermostats are purchased rom the outside source, the factory space previously used to produce thermostats can be used to manufacture an additional 6,000 heat flow requlators per year These regulstors have an estimated contrbution margin of S18 per unit The manufacture of the additional heat-flow regulators would have no effect on fxed overhead 1 Prepare a schedule showing the incremental cost or benett of buying thermostats from the outside source and using the ctory space so produce additional heat fow reguletors 2. Would this new assumption change your recommendation as to whether to make or buy themostats Camplete this question by entering your anawars in the tabs below Req A2 e 82 Pepere a scheduie to detemne the increne cot or bene of buying themosta from the outsde aveple Box he orenental Mabe e Theonewtats thaeatats Ass 2 of 5 l Prev Next Q Search or enter website name 2 6 7 C W E R T Y U tab A D G H K fock X C V B N M ntrol option command command am |S N C highpoint blackboard.com h. 21- Problems Saved 2 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 wil result from discontinuing production of the thermostats. Required: a-1, Prepare a schedule to determine the incremental cost or benefit of buying thermostats from the outside suppler a-2. On 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 used to manufacture an additional 6,000 heat-flow requlators per year. These regulators have an estimated contribution margin of $18 per unit. The manufacture of the additional heat-flow regulators would have no effect on fixed overhead b-1. Prepare a schedule showing the incremental cost or benefit of buying thermostats from the outside source and using the factory space to produce additional heat-flow regulators b-2. Would this new assumption change your recommendation as to whether to make or buy thermostats? points eBook Ask Complete this question by entering your answers in the tabs below. Priet Reg A Reg A2 Req 81 Req 82 Reterences Prepare a schedule to determine the incremental cost or benefit of buying thermostats from the outside supplier Incremental Analysis Make the Thermostats Thermestats Buy the Manutacturing costs for 80,000 themostats 156,000 156.000 Direct materials. 132.000 Direct labor 132.0004 Fixed factory overhead 72.000 180,000 180,000 Manutacturing overhead Variable factory overhead 67 200 168.000 100 800 140.000 144.000 Fixed factory overhead 180000 s80,000 Variable factory overhead 480 000 (480,000) Cost to purchase 28.000 $ 730.000s 702000 Totals Reg A2 X 2 of 5 Next