Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Required information [The following information applies to the questions displayed below.) Morning Sky, Inc. (MSI), manufactures and sells computer games. The company has several product

image text in transcribedimage text in transcribedimage text in transcribedimage text in transcribed

Required information [The following information applies to the questions displayed below.) Morning Sky, Inc. (MSI), manufactures and sells computer games. The company has several product lines based on the age range of the target market. MSI sells both individual games as well as packaged sets. All games are in CD format, and some utilize accessories such as steering wheels, electronic tablets, and hand controls. To date, MSI has developed and manufactured all the CDs itself as well as the accessories and packaging for all of its products. The gaming market has traditionally been targeted at teenagers and young adults; however, the increasing affordability of computers and the incorporation of computer activities into junior high and elementary school curriculums has led to a significant increase in sales to younger children. MSI has always included games for younger children but now wants to expand its business to capitalize on changes in the industry. The company currently has excess capacity and is investigating several possible ways to improve profitability. MSI is considering outsourcing the production of the handheld control module used with some of its products. The company has received a bid from Monte Legend Co. (MLC) to produce 14,000 units of the module per year for $18.00 each. The following information pertains to MSi's production of the control modules: $ 8 Direct materials Direct labor Variable manufacturing overhead Fixed manufacturing overhead Total cost per unit MSI has determined that it could eliminate all variable costs if the control modules were produced externally, but none of the fixed overhead is avoidable. At this time, MSI has no specific use in mind for the space that is currently dedicated to the control module production. Required: 1. Compute the difference in cost between making and buying the control module. 2. Should MSI buy the modules from MLC or continue to make them? 3-a. Suppose that the MSI space currently used for the modules could be utilized by a new product line that would generate $42,000 in annual profit. Recompute the difference in cost between making and buying under this scenario. 3-b. Does this change your recommendation to MSI? Complete this question by entering your answers in the tabs below. Req 1 Req 2 Req 3A Req 3B Compute the difference in cost between making and buying the control module. Difference in Cost Req 1 Req 2 > Complete this question by entering your answers in the tabs below. Reg 1 Req 2 Req 3A Req 3B Should MSI buy the modules from MLC or continue to make them? Should MSI buy the modules from MLC or continue to make them? Complete this question by entering your answers in the tabs below. Req 1 Req 2 Req 3A Req 3B Suppose that the MSI space currently used for the modules could be utilized by a new product line that would generate $42,000 in annual profit. Recompute the difference in cost between making and buying under this scenario. Show less Difference in Cost Reg 38 > Complete this question by entering your answers in the tabs below. Req 1 Req 2 Req 3A Req 3B Does this change your recommendation to MSI? Does this change your recommendation to MSI? Req 3A Reg 3B)

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_2

Step: 3

blur-text-image_3

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

Horngrens Financial & Managerial Accounting, The Financial Chapters

Authors: Tracie Miller Nobles, Brenda Mattison

7th Edition

0136505279, 9780136505273

More Books

Students also viewed these Accounting questions

Question

Design a cross-cultural preparation program. page 313

Answered: 1 week ago

Question

Evaluate employees readiness for training. page 289

Answered: 1 week ago