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Please help. Thanks! Sandboard Inc. currently produces sandboards. Management is interested in outsourcing production of sandboards to a reputable manufacturing company that can supply the
Please help. Thanks!
Sandboard Inc. currently produces sandboards. Management is interested in outsourcing production of sandboards to a reputable manufacturing company that can supply the sandboards for $220 per unit. Sandboard Inc. incurs the following annual production costs to produce 7,000 sandboards internally: Total Annuar Per Cost at Unit 7,000 units Variable production costs: Direct materials 140 $ 980,000 Direct labor 49,000 E.... Manufacturing overhead S 119,000 Fixed production costs: Factory building and equipment lease 200,000 Factory insurance 62,000 Production supervisor salary S 70,000 Total roductio S 1,480,000 Outsourcing production eliminates all variable production costs, the production supervisor's salary, and factory insurance costs. Factory building and equipment lease costs will remain the same regardless of the decision to outsource or to produce internally. Required: A. Perform a differential analysis, assuming that making the sandboard internally is one alternative, and buying the sandboard from an outside manufacturer is the other alternative. B. Explain which alternative is best and why. Your answers to this open-ended assignment should be placed in the space below this line. Alternative Make Buy From Differential Internally Outside Amount Cost to buy from o Variable costs:........ Direct materials Direct labor............... Manufacturing overhead ostS:. Factory building and equipment lease Factory insurance Total production costs Double click and put your answer here. BStep by Step Solution
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