Answered step by step
Verified Expert Solution
Question
1 Approved Answer
REQUIRED Based upon relevant cost differences, should ABC company make or buy the component. Show the calculation Management of Bottleneck company is assessing if the
REQUIRED Based upon relevant cost differences, should ABC company make or buy the component. Show the calculation Management of Bottleneck company is assessing if the company should continue manufacturing a part that the company needs when manufacturing a car. Based on its financial report , it seems it costs the company $45 per unit to make the component. The cost is broken in the following manner $ 20,000 2500 $28.00 $18,000 Raw Materials Direct Labor hours Hourly rate paid to workers Variable Manufacturing Overhead Fixed Manufacturing Overhead Rent (factory] Utilities [Factory] Indirect materials Indirect labour Units manufactured $ 18,500 $ 2,800 $ 6,500 $ 12,300 2000 An outside company Calgary Ltd made an offer to provide the part at $50. Some of the managers felt that this may reduce cost and thus that component can be be bought from outside and discontinue production of the component. If the company purchases from outside , it will save $5.00 per in fixed overhead per unit and $2.00 on variable cost per unit and in addition the company can lease part of the facilities for $4200
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started