Would you be able to assist with the problem below: Complete P14-48 on pages 624-625 of Managerial Accounting: Creating Value in a Dynamic Business Environment and present your responses in an Excel spreadsheet.
\fIncremental Cost analysis Particulars Cost of 10,000 units $ Purchased Components 180,000 Assembly labor 450,000 Variable manufacturing 450,000 Overheads (100% of Direct labor) Total relevant cost 1,080,000 Per Unit Cost $ 18 45 45 108 Were the analysis prepared by Cincinnati Flow Technology's engineering, manufacturing, and accounting departments and their recommendation to continue purchasing the pumps correct? The analysis prepared by Cincinnati Flow Technology's engineering, manufacturing, and accounting department was not correct but their recommendation to continue purchase the pumps were correct if the potential labor cost improvements are ignored. This has been cleared from the following calculations. Explain and include any supporting calculations you consider necessary . Incremental Cost analysis Particulars Cost of 10,000 units $ Purchased Components 180,000 Assembly labor 450,000 Variable manufacturing 450,000 Overheads (100% of Direct labor) Total relevant cost 1,080,000 Per Unit Cost $ 18 45 45 108 Fixed factory overheads and general and administrative cost is not included in this analysis because these costs are not relevant as these costs will remain same and these will not increase. Therefore from the above analysis it has been made cleared that if improvements in potential labor cost are ignored then the company should purchase the pumps rather than manufacturing it because the purchase price of $102 is less than the relevant cost of manufacturing the pumps which comes out to be $108. Incremental Cost analysis Particulars Cost of 10,000 units $ Purchased Components 180,000 Assembly labor 450,000 Variable manufacturing 450,000 Overheads (100% of Direct labor) Total relevant cost 1,080,000 Per Unit Cost $ 18 45 45 108 Were the analysis prepared by Cincinnati Flow Technology's engineering, manufacturing, and accounting departments and their recommendation to continue purchasing the pumps correct? The analysis prepared by Cincinnati Flow Technology's engineering, manufacturing, and accounting department was not correct but their recommendation to continue purchase the pumps were correct if the potential labor cost improvements are ignored. This has been cleared from the following calculations. Explain and include any supporting calculations you consider necessary . Incremental Cost analysis Particulars Cost of 10,000 units $ Purchased Components 180,000 Assembly labor 450,000 Variable manufacturing 450,000 Overheads (100% of Direct labor) Total relevant cost 1,080,000 Per Unit Cost $ 18 45 45 108 Fixed factory overheads and general and administrative cost is not included in this analysis because these costs are not relevant as these costs will remain same and these will not increase. Therefore from the above analysis it has been made cleared that if improvements in potential labor cost are ignored then the company should purchase the pumps rather than manufacturing it because the purchase price of $102 is less than the relevant cost of manufacturing the pumps which comes out to be $108
