Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

The management of a fictional manufacturing company, XYZ Inc., is faced with a decisionregarding the production of a component named Widget for their flagship product.

The management of a fictional manufacturing company, XYZ Inc., is faced with a decisionregarding the production of a component named "Widget" for their flagship product. The Widgetis a critical part of their product line, and management must decide whether to continue producingit in-house or to outsource its production to an external supplier.The following information was collected from the accounting records and production data for theyear ending December 31,2022.-5,000 units of Widget were produced in the Machining Department.- Variable manufacturing costs applicable to the production of each Widget unit were:1. Direct materials $0.802. Direct labor $0.303. Indirect labor $0.434. Utilities $0.40- Fixed manufacturing costs applicable to the production of Widget were:Cost Item Direct AllocatedRent $4,100 $900Depreciation 400200Property taxes 300600All variable manufacturing and direct fixed costs will be eliminated if Widget is purchased.Allocated costs will not be eliminated if Widget is purchased. So if Widget is purchased, the fixedmanufacturing costs allocated to Widget will have to be absorbed by other production departments.- The quotation for 5,000 Widget units from a supplier is $3.2/unitInstructions:a. Prepare the incremental analysis for the decision to make or buy the Widget.

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

Accountancy And The Changing Landscape Of Integrated Reporting

Authors: Ioana Dragu

1st Edition

1522536221, 9781522536222

More Books

Students also viewed these Accounting questions

Question

Define Administration?

Answered: 1 week ago