Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

The Rider Company produces chairs. This year's expected production is 30,000 units. Currently, Rider makes the upholstery for the chairs in its factory. Rider's





The Rider Company produces chairs. This year's expected production is 30,000 units. Currently, Rider makes the upholstery for the chairs in its factory. Rider's management accountant reports the following costs for the upholstery for the 30,000 chairs: Cost per Unit Direct materials $ Variable direct manufacturing labor Variable manufacturing overhead Variable inspection, setup, materials handling Allocated fixed costs of plant administration, taxes, and insurance Total costs 69 Cost for 30,000 Units 180,000 84,000 45,000 180,000 75,000 564,000 6.00 $ 2.80 1.50 $ Rider has received an offer from an outside vendor to supply the upholstery for the chairs Rider requires at $16.00 per chair. Requirement 2. For this question, assume that if the upholstery is purchased outside, the available unused facilities will be used to make pillows to match the chairs. Each pillow costs $40 with a variable cost of $34. No other costs would change and the company expects to sell 10,000 pillows. On the basis of financial considerations alone, should Rider make or buy the upholstery for their chairs, assuming that 30,000 chairs are produced (and sold)? Show your calculations. (Enter any deductions with a parentheses or a minus sign. If an input field is not used in the table, leave the input field empty; do not enter a zero.) Make Buy Relevant Costs Total relevant costs On the basis of financial considerations alone, should Rider make or buy the upholstery, assuming that 30,000 chairs are produced (and sold)? Rider should the upholstery, assuming that 30,000 chairs are produced (and sold). Relevant Costs Additional contribution margin from selling pillows Additional tooling costs Allocated fixed costs Direct manufacturing labor Direct materials Machine rent Purchase cost Variable inspection, setup, materials handling Variable manufacturing overhead Buy ider make or buy the upholster 000 chairs are produced (and s Make Total relevant costs On the basis of financial considerations alone, should Rider make or buy the upholstery, assuming tha Rider should the upholstery, assuming that 30,000 chairs are produced (and sold). Requirement anager at Rider is concerned that the estimate of 30,000 chairs may be make Choose from buy er any number in the input fields and then continue to the next ques

Step by Step Solution

3.49 Rating (156 Votes )

There are 3 Steps involved in it

Step: 1

Requirement 2 For this question assume that if the upholstery is purchased outside the available u... 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

Cost Accounting A Managerial Emphasis

Authors: Horngren, Srikant Datar, George Foster, Madhav Rajan, Christ

6th Canadian edition

978-0132893534, 9780133389401, 132893533, 133389405, 978-0133392883

More Books

Students also viewed these Accounting questions