Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Recher Corporation uses part 089 in one of its products. The company's Accounting Department reports the following cow of producing the 8,300 units of the

image text in transcribed
image text in transcribed
image text in transcribed
Recher Corporation uses part 089 in one of its products. The company's Accounting Department reports the following cow of producing the 8,300 units of the part that are needed every year Per Direct materiais Unit 38.60 Direet labor 06.10 Variable overhead $9.50 Supervisor'walary 3.60 Depreciation of special equipment $3.00 Allocated general overhead $1.60 An outside supplier has offered to make the part and sell it to the company for $30.00 each. If this offer is accepted the supervisor's salary and all of the variable costs, including direct labor, can be avoided. The special equipment used to make the part was purchased many years ago and has no salvage value or other use. The allocated general overhead represents fowed costs of the entire company If the outside supplier's offer were accepted, only $4,600 of these allocated general overhead costs would be avoided. In addition, the space used to produce part 089 could be used to make more of one of the company's other products, generating an additional segment margin of $14,300 per year for that product Required: a. Prepare a report that shows the financial impact of buying port 089 from the supplier rather than continuing to make it inside the company b. Which alternative should the company choose? . Complete this question by entering your answers in the tabs below. Required A Required B Prepare a report that shows the financial impact of buying part Q89 from the supplier rather than continuing to make it inside the company Make Buy Next > Prepare a report that shows the financial impact of buying part 289 from the supplier rather than continuing to make it inside the company Buy $ Make 71,380 39,840 78,850 29,880 0 Direct materials Direct labor Variable overhead Supervisor's salary Depreciation of special equipment Allocated general overhead Outside purchase price Opportunity cost Total cost 4,600 $ 249,000 (14.300) 234,700 $ 224,550 $ Required Required B > Required A Required B Which alternative should the company choose? The total cost of the "make" alternative is by Therefore, the company should the part

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

Auditing and Assurance Services A Systematic Approach

Authors: William Messier, Steven Glover, Douglas Prawitt

9th edition

1308361491, 77862333, 978-1259248290, 9780077862336, 1259162346, 978-1259162343

More Books

Students also viewed these Accounting questions