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Misha Crystal Ball, Inc. makes crystal balls and the fancy stands for them. Last year the company made 5,000 completed units with the following
Misha Crystal Ball, Inc. makes crystal balls and the fancy stands for them. Last year the company made 5,000 completed units with the following costs for the stands: Direct materials $5.00 Direct labor $2.60 Manufacturing overhead $3.30 Total costs $10.90 The company applies variable manufacturing overhead of $1.40 per stand. The remaining manufacturing overhead costs are related to fixed costs. Next year the company plans to make 7,500 fancy stands though it is considering buying the stands instead. Casper Fancy Wood Products has offered to sell the stands to the company at a cost of $9.80 per stand. If Misha Crystal Ball, Inc. accepts the offer then all variable costs and fixed costs will be avoided. Required (please show your work): a. Calculate the cost to buy. b. Calculate the avoidable fixed costs. c. Calculate the cost to make 7,500 stands. d. Should Misha Crystal Ball, Inc. accept the offer to buy the stands from Casper Fancy Wood Products, and why? (need to have at least 2-3 sentences)
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Step: 1
a To calculate the cost to buy we need to consider the cost per stand offered by Casper Fancy Wood Products which is 980 b The avoidable fixed costs a...Get Instant Access to Expert-Tailored Solutions
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Step: 2
Step: 3
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