Question
Wilson Sports creates and manufacturers golf equipment, clubs, balls as well as a special practice mat for putting. Each mat has a unique component to
Wilson Sports creates and manufacturers golf equipment, clubs, balls as well as a special practice mat for putting. Each mat has a unique component to accompany the other parts of the pratice mat. The company is at the final development stage of a new updated practice mat Since it is important that the mat be on the shelves quickly to take advantage of the holiday buying season, the Production Manager is considering an offer from an outside supplier to make the component for $18.50 per component. The accounting department prepared the following cost estimates for producing the component Direct material Direct labour Production overhead Corporate overhead Cast of component Cost per Unit $7.00 3.00 7.24 1.30 $18.54 The accountant has also provided the following information: The component can be produced using current machinery that has a capacity to produce 500,000 units per month and is 50% utilized. The anticipated demand for this new game will not exceed 50,000 units a month, according to the sales team. Half of the production overhead is fixed. The corporate overhead allocation is based on 18.6% of the direct materials charge Required: Compute monthly net benefit of making the component rather than buy the component from the supplier. (Do not round Intermediate calculations.) Net benefit of making the component per month State whether Wilson sports should make the component or buy from the suppiler. make buy
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