Mohave Corp. is considering outsourcing production ofthe umbrella tote bag included with some of its products. The company has received a bid from a supplier in Vietnam to produce 9,600 units per year for $7.00 each. Mohave has the following information about the cost of producing tote bags: Direct materials $3.00 Direct labor 2 .00 Variable manufacturing overhead 1.00 Fixed manufacturing overhead 2.50 Total cost per unit $8.50 Mohave has determined that all variable costs could be eliminated by outsourcing the tote bags, while 75 percent of the fixed overhead cost is unavoidable. At this time, Mohave has no specic use in mind for the space currently dedicated to producing the tote bags. Required: 1. Compute the difference in cost between making and buying the umbrella tote bag. 2. Based strictly on the incremental analysis, should Mohave buy the tote bags or continue to make them? 3-a. Suppose that the space Mohave currently uses to make the bags could be utilized by a new product line that would generate $6,000 in annual prots. Recompute the difference in cost between making and buying the umbrella tote bag. 3-b. Does this change your recommendation to Mohave? Complete this question by entering your answers in the tabs below. Req 1 Req 2 Req 3A Req 3B Compute the difference in cost between making and buying the umbrella tote bag. bags. Required: 1. Compute the difference in cost between making and buying the umbrella tote bag. 2. Based strictly on the incremental analysis, should Mohave buy the tote bags or continue to make them? 3-a. Suppose that the space Mohave currently uses to make the bags could be utilized by a new product line that would generate $6,000 in annual prots. Recompute the difference in cost between making and buying the umbrella tote bag. 3-b. Does this change your recommendation to Mohave? Complete this question by entering your answers in the tabs below. Req 1 Req 2 Req 3A Req BB Compute the difference in cost between making and buying the umbrella tote bag. Mohave has determined that all variable costs could be eliminated by outsourcing the tote bags, while 75 percent ofthe xed overhead cost is unavoidable. At this time, Mohave has no specific use in mind for the space currently dedicated to producing the tote bags. Required: 1. Compute the difference in cost between making and buying the umbrella tote bag. 2. Based strictly on the incremental analysis, should Mohave buy the tote bags or continue to make them? 3-a. Suppose that the space Mohave currently uses to make the bags could be utilized by a new product line that would generate $6,000 in annual prots. Recompute the difference in cost between making and buying the umbrella tote bag. 3-b. Does this change your recommendation to Mohave? Complete this question by entering your answers In the tabs below. Req 1 Req 3A Req 3B m ADED i Saved Help Save & Exit Submit Check my work UVUIIILUN LOUL IN HILVVIUUNIL . AL WIIU LIIIIN, ITIVERUVU BUU HIV UPLUIILL UDU III IIIIII IVI TIL UPULL CHILLINLILY ULUILULLY LV PIVRULING WIIL EVIL bags. Required: 1. Compute the difference in cost between making and buying the umbrella tote bag. 2. Based strictly on the incremental analysis, should Mohave buy the tote bags or continue to make them? 3-a. Suppose that the space Mohave currently uses to make the bags could be utilized by a new product line that would generate $6,000 in annual profits. Recompute the difference in cost between making and buying the umbrella tote bag. 3-b. Does this change your recommendation to Mohave? Complete this question by entering your answers in the tabs below. Req 1 Req 2 Req 3A Req 3B Suppose that the space Mohave currently uses to make the bags could be utilized by a new product line that would generate $6,000 in annual profits. Recompute the difference in cost between making and buying the umbrella tote bag. Differential Cost of Making Versus Buying Check my work Mohave has determined that all variable costs could be eliminated by outsourcing the tote bags, while 75 percent of the fixed overhead cost is unavoidable. At this time, Mohave has no specific use in mind for the space currently dedicated to producing the tote bags. Required: 1. Compute the difference in cost between making and buying the umbrella tote bag. 2. Based strictly on the incremental analysis, should Mohave buy the tote bags or continue to make them? 3-a. Suppose that the space Mohave currently uses to make the bags could be utilized by a new product line that would generate $6,000 in annual profits. Recompute the difference in cost between making and buying the umbrella tote bag. 3-b. Does this change your recommendation to Mohave? Complete this question by entering your answers in the tabs below. Req 1 Req 2 Req 3A Req 3B Does this change your recommendation to Mohave? OYes No
