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Solution 1:
Incremental Analysis - Concord Manufacturing Company | |||
Particulars | Make CISCO | Buy CISCO | Net Income Increase (Decrease) |
Direct material | $36,800.00 | $36,800.00 | |
Direct labor | $33,520.00 | $33,520.00 | |
Indirect labor | $3,360.00 | $3,360.00 | |
Utilities | $3,200.00 | $3,200.00 | |
Depreciation | $2,820.00 | $920.00 | $1,900.00 |
Property taxes | $810.00 | $270.00 | $540.00 |
Insurance | $1,500.00 | $630.00 | $870.00 |
Purchase price | $77,520.00 | -$77,520.00 | |
Freight and inspection | $2,720.00 | -$2,720.00 | |
Receiving costs | $1,300.00 | -$1,300.00 | |
Total annual costs | $82,010.00 | $83,360.00 | -$1,350.00 |
Solution 2:
The company should make CISCO.
Solution 3:
Yes, in this case company should buy Cisco as net financial advantage of buying = $3,000 - $1,350 = $1,650
The management of Concord Manufacturing Company is trying to decide whether to continue manufacturing a part...
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The management of Shatner Manufacturing Company is trying to decide whether to continue manufacturing a part or to buy it from an outside supplier. The part, called CISCO, is a component of the company’s finished product. The following information was collected from the accounting records and production data for the year ending December 31, 2020. 1. 7,900 units of CISCO were produced in the Machining Department. 2. Variable manufacturing costs applicable to the production of each CISCO unit were: direct...
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