Problem Smed Mohave Corp. is considering outsourcing production of the umbrella tote bag included with some of its products. The company has received a bid from a supplier in Vietnam to produce 9,300 units per year for $7.00 each. Mohave has the following information about the cost of producing tote bags: $4.09 1.09 Direct materials Direct labor Variable manufacturing overhead Fixed manufacturing overhead Total cost per unit Mohave has determined that all variable costs could be eliminated by outsourcing the tote bags, while 70 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 $5,000 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. Reg1 Reg 2 Reg 3A Reg 3B Compute the difference in cost between making and buying the umbrella tote bag. Problem Variable manufacturine overhead Fixed manufacturing overhead Total cost per unit Mohave has determined that all variable costs could be eliminated by outsourcing the tote bags, while 70 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 $5,000 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. Reg 1 Reg 2 Reg 2 Rea SA Reg 3B Req 38 Should Mohave buy the tote bags or continue to make them? Make Buy Variable manufacturing overhead Fixed manufacturing overhead Total cost per unit Mohave has determined that all variable costs could be eliminated by outsourcing the tote bags, while 70 percent of the foxed 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. Suppose that the space Mohave currently uses to make the bags could be utilized by a new product line that would generate $5,000 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. Red 3A Reg 3B Reg 2 Reg 1 Suppose that the space Mohave currently uses to make the bags could be utilized by a new product line that would generate $5,000 in annual profits. Recompute the difference in cost between making and buying the umbrella tote bag. Differential Cost of Making Versus Buying Reg 3B > (Reg 2 rial Problem Variable manufacturing over head Fixed manufacturing overhead Total cost per unit Mohave has determined that all variable costs could be eliminated by outsourcing the tote bags, while 70 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 $5,000 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. Reg 1 Reg 2 Reg 3A Req Does this change your recommendation to Mohave? ONE ( Req 3A
