Question
Windsor Firm is considering whether to outsource the manufacture of subcomponent JXY. The accounting department provides the following cost information for manufacturing 10,800 units of
Windsor Firm is considering whether to outsource the manufacture of subcomponent JXY. The accounting department provides the following cost information for manufacturing 10,800 units of subcomponent JXY per month.
Direct materials costs | $39,700 | ||
Direct labour costs | 30,700 | ||
Variable overhead | 14,500 | ||
Fixed overhead* | 13,000 |
*Fixed overhead includes $4,600 supervisors salary. International Firm agrees to supply Windsor with 10,800 units per month for a total cost of $115,100. If subcomponent JXY is outsourced, Windsor will be able to increase the production and sales of its final product by 1,030 units per month; the product is sold for $100 per unit and its average variable costs per unit are $80. The supervisors salary will be eliminated if subcomponent JXY is outsourced.
(a)
Prepare an incremental analysis for subcomponent JXY. (If an amount reduces the incremental costs then enter with a negative sign preceding the number e.g. -15,000 or parenthesis, e.g. (15,000). While alternate approaches are possible, irrelevant fixed costs should be included in both options when solving this problem.)
Make | Buy | Incremental Costs (Savings) | |||||
---|---|---|---|---|---|---|---|
select an item Opportunity costDirect materialsFixed overheadTotal monthly costPurchase priceDirect labourCost of good soldManufacturing overheadVariable overheadCost of good soldManufacturing overhead | $enter a dollar amount | $enter a dollar amount | $enter a dollar amount | ||||
select an item Purchase priceFixed overheadOpportunity costTotal monthly costVariable overheadDirect materialsDirect labourCost of good soldManufacturing overheadCost of good soldManufacturing overhead | enter a dollar amount | enter a dollar amount | enter a dollar amount | ||||
select an item Cost of good soldManufacturing overheadCost of good soldManufacturing overheadPurchase priceDirect labourVariable overheadTotal monthly costFixed overheadDirect materialsOpportunity cost | enter a dollar amount | enter a dollar amount | enter a dollar amount | ||||
select an item Direct labourVariable overheadTotal monthly costCost of good soldManufacturing overheadFixed overheadDirect materialsOpportunity costPurchase priceCost of good soldManufacturing overhead | enter a dollar amount | enter a dollar amount | enter a dollar amount | ||||
select an item Opportunity costPurchase priceDirect materialsFixed overheadCost of good soldManufacturing overheadCost of good soldManufacturing overheadVariable overheadDirect labourTotal monthly cost | enter a dollar amount | enter a dollar amount | enter a dollar amount | ||||
select an item Fixed overheadPurchase priceCost of good soldManufacturing overheadDirect labourVariable overheadTotal monthly costDirect materialsCost of good soldManufacturing overheadOpportunity cost | enter a dollar amount | enter a dollar amount | enter a dollar amount | ||||
select a closing name Opportunity costTotal monthly costVariable overheadDirect materialsCost of good soldManufacturing overheadPurchase priceFixed overheadDirect labourCost of good soldManufacturing overhead | $enter a total amount | $enter a total amount | $enter a total amount |
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