practice question 5 please
5.a. Using the information about the supplier bids (and related tariffs where applicable) in Exhibit 3, as well as the projected savings information in Exhibit 2, compare the costs calculated in points 1 through 3 with the option to outsource. Based on your calculations, be prepared to recommend the choice between continuing to make the electronic toys in house or outsource to a supplier (which one would you choose and why?) Exhibit 2: Summary of Prospective Savings Opportunities if the Company Decides to Outsource 5,000,000 5,000,000 8,400,000 25,000,000 43,400,000 Overhead Expenses Equipment maintenance (SMD machine) Utilities Unused materials scrap (2% of material costs) Elf training programs Total Overhead Savings Operating Expenses "Research activities Licenses Market Research Costs Total Operational Savings Total Savings from Outsourcing 15,000,000 8,000,000 6,000,000 29,000,000 72,400,000 Source: Casewriters Notes: All monetary amounts are expressed in pieces of gold (POG) Exhibi 3: Bids from Prospective Suppliers Supplier Sasquatch Partnership Dwarven League Location Canada Czech Republic Quoted Price ( PG) Note 372,000,000 Fixed annual price 2.85 Unit Price Source: Casewriters Notes: All monetary amounts are expressed in pieces of gold (PG) X f x =936000000/C8 E F G 2.50 Burden Rate: Total Manufacturing Overhead (POG) Total Elf Direct Labor (POG) 1,170,000,000 = 468,000,000 Total Quantity Traditional Toys Electronic Toys 480,000,000 120,000,000 Per unit Direct Material Cost Traditional Toys Electronic Toys Total 0.50 1.50 Total 240,000,000.00 180,000,000.00 420,000,000.00 0.90 Direct Labor Cost Traditional Toys Electronic Toys Total Total 432,000,000.00 36,000,000.00 468,000,000.00 0.30 Total Allocated Overhead Traditional Toys Electronic Toys Total 1.95 1.95 936,000,000.00 234,000,000.00 1,170,000,000.00 Total Product Cost Traditional Toys Electronic Toys 3.35 3.75 Total 1,608,000,000.00 450,000,000.00 2,058,000,000.00 Exhibit Exhibit 2 Exhibit 3 Exhibit 4 Exhibit Exhibit 6 Assignment Instruction Ex vfx =C12+C17+C22 2.b. Total Quantity Traditional Toys Electronic Toys 480,000,000 120,000,000 Per unit Total Direct Material Cost Traditional Toys Electronic Toys Total 0.50 1.50 240,000,000.00 180,000,000.00 420,000,000.00 Per unit Direct Labor Cost Traditional Toys Electronic Toys 0.90 0.30 Total 432,000,000.00 36,000,000.00 468,000,000.00 Total Per unit Allocated Variable Overhead Traditional Toys Electronic Toys Total 0.74 0.74 Total 355,680,000.00 88,920,000.00 444,600,000.00 Per unit Total Product Cost Traditional Toys Electronic Toys 2.14 2.54 Total 1,027,680,000.00 304.920,000.00 1,332,600,000.00 Total - Exhibit 1 Exhibit 2 Exhibit Exhibit & Exhibits Exhibit a Assignment Instructi E Accounting $ % , 3 Calibri (Body) 12 A A BI U - BA Xv fx 1.89 3.b. Total Quantity Traditional Toys Electronic Toys 480,000,000 120,000,000 Per unit Direct Material Cost Traditional Toys Electronic Toys 0.50 1.50 Total 240,000,000.00 180,000,000.00 420,000,000.00 Per unit Direct Labor Cost Traditional Toys Electronic Toys 0.90 0.30 Total 432,000,000.00 36,000,000.00 468,000,000.00 Total 0.01 Allocated Elf Labor Related Overhead Traditional Toys Electronic Toys Total 1.89 Total 4,800,000.00 226,800,000.00 231,600,000.00 Per unit Allocated Elf Logistics Related Overhead Traditional Toys Electronic Toys 0.70 1.59 Total 336,000,000.00 190,800,000.00 526,800,000.00 Total Allocated Equipment Related Overhead Traditional Toys Electronic Toys Total 0.20 2.63 Total 96,000,000.00 315,600,000.00 411,600,000.00 Per unit NMS Total Product Cost Traditional Toys Electronic Toys 2.31 7.91 10.22 Total 1,108,800,000.00 949,200,000.00 2,058,000,000.00 Total Exhibit 1 Exhibit 2 Exhibit 3 Exhibit 4 Exhibit 5 Exhibit 6 Assignment Instructions AN 5.a. Using the information about the supplier bids (and related tariffs where applicable) in Exhibit 3, as well as the projected savings information in Exhibit 2, compare the costs calculated in points 1 through 3 with the option to outsource. Based on your calculations, be prepared to recommend the choice between continuing to make the electronic toys in house or outsource to a supplier (which one would you choose and why?) Exhibit 2: Summary of Prospective Savings Opportunities if the Company Decides to Outsource 5,000,000 5,000,000 8,400,000 25,000,000 43,400,000 Overhead Expenses Equipment maintenance (SMD machine) Utilities Unused materials scrap (2% of material costs) Elf training programs Total Overhead Savings Operating Expenses "Research activities Licenses Market Research Costs Total Operational Savings Total Savings from Outsourcing 15,000,000 8,000,000 6,000,000 29,000,000 72,400,000 Source: Casewriters Notes: All monetary amounts are expressed in pieces of gold (POG) Exhibi 3: Bids from Prospective Suppliers Supplier Sasquatch Partnership Dwarven League Location Canada Czech Republic Quoted Price ( PG) Note 372,000,000 Fixed annual price 2.85 Unit Price Source: Casewriters Notes: All monetary amounts are expressed in pieces of gold (PG) X f x =936000000/C8 E F G 2.50 Burden Rate: Total Manufacturing Overhead (POG) Total Elf Direct Labor (POG) 1,170,000,000 = 468,000,000 Total Quantity Traditional Toys Electronic Toys 480,000,000 120,000,000 Per unit Direct Material Cost Traditional Toys Electronic Toys Total 0.50 1.50 Total 240,000,000.00 180,000,000.00 420,000,000.00 0.90 Direct Labor Cost Traditional Toys Electronic Toys Total Total 432,000,000.00 36,000,000.00 468,000,000.00 0.30 Total Allocated Overhead Traditional Toys Electronic Toys Total 1.95 1.95 936,000,000.00 234,000,000.00 1,170,000,000.00 Total Product Cost Traditional Toys Electronic Toys 3.35 3.75 Total 1,608,000,000.00 450,000,000.00 2,058,000,000.00 Exhibit Exhibit 2 Exhibit 3 Exhibit 4 Exhibit Exhibit 6 Assignment Instruction Ex vfx =C12+C17+C22 2.b. Total Quantity Traditional Toys Electronic Toys 480,000,000 120,000,000 Per unit Total Direct Material Cost Traditional Toys Electronic Toys Total 0.50 1.50 240,000,000.00 180,000,000.00 420,000,000.00 Per unit Direct Labor Cost Traditional Toys Electronic Toys 0.90 0.30 Total 432,000,000.00 36,000,000.00 468,000,000.00 Total Per unit Allocated Variable Overhead Traditional Toys Electronic Toys Total 0.74 0.74 Total 355,680,000.00 88,920,000.00 444,600,000.00 Per unit Total Product Cost Traditional Toys Electronic Toys 2.14 2.54 Total 1,027,680,000.00 304.920,000.00 1,332,600,000.00 Total - Exhibit 1 Exhibit 2 Exhibit Exhibit & Exhibits Exhibit a Assignment Instructi E Accounting $ % , 3 Calibri (Body) 12 A A BI U - BA Xv fx 1.89 3.b. Total Quantity Traditional Toys Electronic Toys 480,000,000 120,000,000 Per unit Direct Material Cost Traditional Toys Electronic Toys 0.50 1.50 Total 240,000,000.00 180,000,000.00 420,000,000.00 Per unit Direct Labor Cost Traditional Toys Electronic Toys 0.90 0.30 Total 432,000,000.00 36,000,000.00 468,000,000.00 Total 0.01 Allocated Elf Labor Related Overhead Traditional Toys Electronic Toys Total 1.89 Total 4,800,000.00 226,800,000.00 231,600,000.00 Per unit Allocated Elf Logistics Related Overhead Traditional Toys Electronic Toys 0.70 1.59 Total 336,000,000.00 190,800,000.00 526,800,000.00 Total Allocated Equipment Related Overhead Traditional Toys Electronic Toys Total 0.20 2.63 Total 96,000,000.00 315,600,000.00 411,600,000.00 Per unit NMS Total Product Cost Traditional Toys Electronic Toys 2.31 7.91 10.22 Total 1,108,800,000.00 949,200,000.00 2,058,000,000.00 Total Exhibit 1 Exhibit 2 Exhibit 3 Exhibit 4 Exhibit 5 Exhibit 6 Assignment Instructions AN
