Make or Buy Terry Inc. manufactures machine parts for aircraft engines. CEO Bucky Walters is considering an offer from a subcontractor to provide 1,900 units of product OP89 for $95,000. If Terry does not purchase these parts from the subcontractor, it must continue to produce them in-house with these costs:

	Costs per Unit
Direct materials	$25
Direct labor	15
Variable overhead	13
Allocated fixed overhead	5

Required:

Calculate the relevant cost for producing the product.

Calculate the additional cost or savings of producing the product internally versus purchasing the product externally, from a supplier..

References

eBook & Resources

WorksheetDifficulty: 3 HardLearning Objective: 11-03 Use relevant cost analysis and strategic analysis in the make, lease, or buy decision.

Check my work

2.

value: 10.00 points

Required information

b.	Disposal of Assets A company has an inventory of 3,500 different parts for a line of cars that has been discontinued. The net book value (NBV) of this inventory is $65,000. The parts can be either remachined at a total additional cost of $32,500 and then sold for $45,000 or sold as-is for $3,250.

Required:

Calculate the net benefit or loss of remachining the parts instead of scrapping them.

References

eBook & Resources

WorksheetDifficulty: 3 HardLearning Objective: 11-04 Use relevant cost analysis and strategic analysis in the decision to sell before or after additional processing.

Check my work

3.

value: 10.00 points

Required information

c.	Replacement of an Asset An uninsured boat costing $105,000 was wrecked the first day it was used. It can be either sold as-is for $10,500 cash and replaced with a similar boat costing $107,000 or rebuilt for $90,000 and be brand new as far as operating characteristics and looks are concerned.

Required:

What is the difference in cost between the two options?

Based solely on financial considerations, what is the appropriate decision?

	Sell as-is for $10,500 cash and replace with a similar boat costing $107,000.
	Rebuild for $90,000.

References

eBook & Resources

WorksheetDifficulty: 3 HardLearning Objective: 11-01 Define the decision-making process and identify the types of cost information relevant for decision making.

Check my work

4.

value: 10.00 points

Required information

d.	Profit from Processing Further Deaton Corporation manufactures products A, B, and C from a joint process. Joint costs are allocated on the basis of relative sales value at the split-off point. Additional information for Deaton Corporation follows:

	A		B		C		Total
Units produced		13,500		9,500		5,500		28,500
Joint costs	$	159,000	$	75,000	$	87,100	$	321,100
Sales value before additional processing		255,000		115,000		75,000		445,000
Additional costs for further processing		35,500		35,000		27,000		97,500
Sales value if processed further		310,000		150,000		98,500		558,500

Required:

2a.	Calculate the differential benefit (loss) for products A, B, and C. (Loss amounts should be indicated with a minus sign.)

2b.

Which, if any, of products A, B, and C should be processed further and then sold?

	Product A
	Product B
	Product C
	None of the above
	All of the above May I please receive a step-by-step walkthrough on how to get the soution for each answer.