Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Question 1(10 mins, 20 marks) The Hyatt Company is trying to decide whether it should continue to make its sub-assemblies or if it should purchase

Question 1(10 mins, 20 marks)

The Hyatt Company is trying to decide whether it should continue to make its sub-assemblies or if it should purchase them from an outside supplier for $9.00 each.Currently, 40,000 units per year are manufactured internally, with the following costs:

Direct Materials $ 3.00
DirectLabour $ 4.20
Variable Overhead $ 0.60
Fixed Overhead* $ 3.70
Total Manufacturing Cost per Unit $ 11.50

* The fixed overhead cost consists of $0.80 for supervision**, $0.90 for taxes and $2.00 for rent.

** The supervisor position would be eliminated if the sub-assemblies were sourced outside.

Required:

  1. Prepare an analysis of the two alternatives and make a recommendation. 14 Marks

Assume that Hyatt could use the facilities to expand production for another product that would yield an additional contribution margin of $80,000 annually.What is the maximum

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Educational Foundations

Authors: Leslie Kaplan, James D Stice, William Owings

2nd Edition

1285968298, 9781285968292

More Books

Students also viewed these Accounting questions

Question

What is the meaning and definition of E-Business?

Answered: 1 week ago

Question

6. How can hidden knowledge guide our actions?

Answered: 1 week ago