Answered step by step
Verified Expert Solution
Question
1 Approved Answer
Winona Johnson is the president of Johnson Mfg., which manufactures coats. She is trying to decide whether to make 3,000 Type Ill coats or purchase
Winona Johnson is the president of Johnson Mfg., which manufactures coats. She is trying to decide whether to make 3,000 Type Ill coats or purchase them from a subcontractor to fill a special order that she just received. There are no marketing costs on the special order. Acceptance of the special order would not necessitate any premium pay for overtime work or additional fixed costs. The management accountant for Johnson Mfg. has supplied the following data: Per-Unit Cost Data for Type III Coats: Sale Price Direct Materials Direct Labor Fixed Manufacturing Overhead Variable Manufacturing Overhead Variable Marketing Costs Fixed Marketing Costs Fixed Administrative Overhead Nowowote Required: 1. At what purchase price per unit would Ms. Johnson be indifferent as to whether her firm manufactured the coats or purchased them from a subcontractor? 2. Suppose the decision to buy the Type Ill coats frees up space that Johnson Mfg. can lease out for $30,000? What is the purchase cost of the coats that will make Johnson indifferent between making the coats or buying them from a subcontractor? 3. What strategic factors might influence Ms. Johnson's decision regarding this make-vs-buy decision
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started