Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Waterways has discovered that a small fitting it now manufactures at a cost of $1.00 per unit could be bought elsewhere for $0.82 per unit.

image text in transcribedimage text in transcribed

Waterways has discovered that a small fitting it now manufactures at a cost of $1.00 per unit could be bought elsewhere for $0.82 per unit. Waterways has fixed costs of $0.20 per unit that cannot be eliminated by buying this unit. Waterways needs 464.000 of these units each year. If Waterways decides to buy rather than produce the small fitting, it can devote the machinery and labor to making a timing unit it now buys from another company. Waterways uses approximately 400 of these units each year. The cost of the unit is $12.61. To aid in the production of this unit Waterways would need to purchase a new machine at a cost of $2,339, and the cost of producing the units would be $10.00 a unit Your answer is partially correct. Without considering the possibility of making the timing unit evaluate whether Waterways should buy or continue to make the small fitting The company should make the fitting Incremental cost /(savings) will be $ eTextbook and Media * Your answer is incorrect. What is Waterways'opportunity cost if it chooses to buy the small fitting and start manufacturing the timing unit? The opportunity cost is $ Current Attempt in Progress Waterways is considering the replacement of an antiquated machine that has been slowing down production because of breakdowns and added maintenance. The operations manager estimates that this machine still has 2 more years of possible use. The machine produces an average of 50 units per day at a cost of $6.60 per unit, whereas other similar machines are producing twice that much. The units sell for $9.10. Sales are equal to production on these units, and production runs for 260 days each year. The replacement machine would cost $67,900 and have a 2-year life. Given the information above, what are the consequences of Waterways replacing the machine that is slowing down production because of breakdowns? Replacing the machine will result in a of $ Waterways keep the ol

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

International Financial Reporting

Authors: Alan Melville

7th Edition

1292293128, 9781292293127

More Books

Students also viewed these Accounting questions