Question

This is a major project so please show all formulas/work on Excel. Thank you so much!

Instructions Enter your name and Access ID (aa1234' format) in the cells above. The data required for this case will not appear until you do so. You are a financial manager for Zoom Corp., which manufactures bicycles. In the most recent fiscal year, Zoom manufactured and sold 20,000 bicycles. Wheels, seats, and brake calipers are three components of the bicycles currently manufactured by Zoom. Three different vendors have proposed to provide those components to Zoom, and quoted prices (including shipping) for their delivery. Your task is to determine which, if any, of these proposals should be accepted. Prepare a make vs. buy incremental analysis for each possible course of action in an Excel worksheet. Your grade will be based on the correctness of your answers, as well as the use of Excel. That is, where possible, you should use formulas to get your answers, rather than keyed-in values. See your instructor for help with Excel basics if you need it. In a Word document, prepare a memo stating which of the proposals you suggest accepting, as well as the basis for your conclusions. Also identify any nonfinancial factors you should consider before accepting any of the outsourcing proposals. Attach both files to the Canvas assignment space by the due date of November 6th Below is cost data for Zoom's production of wheels, seats, and calipers. Outside suppliers have offered to provide wheels for $7.31, seats for $8.25, and calipers for $2.42 per piece. Both wheels and seats are branded with the Zoom logo, and that logo will need to be added at the Zoom factory at a cost of $0.50 each for any of these components that are outsourced. For all three components, 75% of the fixed costs are avoidable, and will be eliminated if the component's production is outsourced. In addition, seats and calipers are both produced out of the same small factory space. If both seats and calipers were outsourced, Zoom could lease the space out and increase net income by $20,000 per year, while eliminating all fixed costs for the two components. Wheels Seats Calipers Cost category Direct materials Direct labor Variable overhead Fixed overhead Total cost $140,500 94,500 21,000 62,800 $318,800 $52,500 73,500 14,000 39,600 $ 179,600 $91,000 41,000 16,000 29,000 $177,000 Units produced Cost per unit 40,000 $7.97 20,000 $8.98 80,000 $2.21 Hints: Prepare incremental analyses for each component separately. Make wheels vs. buy wheels, etc. Since there are additional implications to outsourcing both seats and calipers, do a make vs. buy analysis assuming both are outsourced. A correct solution, then, will likely have at least four incremental analyses.

Answer 1

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Wheels				in Buy
		Make	Buy	Increase/(Decrease)
Purchase cost	40,000*$7.31		$   292,400	$                                292,400
Direct material		$            140,500		$                             (140,500)
Direct labor		$               94,500		$                                (94,500)
Variable overhead		$               21,000		$                                (21,000)
Logo Cost	40,000*$0.50		$      20,000	$                                  20,000
Fixed overhead	$62,800*25%	$               62,800	$      15,700	$                                (47,100)
Decrease in cost in BUY				$                                    9,300
Seats				in Buy
		Make	Buy	Increase/(Decrease)
Purchase cost	20,000*$8.25		$   165,000	$                                165,000
Direct material		$               52,500		$                                (52,500)
Direct labor		$               73,500		$                                (73,500)
Variable overhead		$               14,000		$                                (14,000)
Logo Cost	20,000*$0.50		$      10,000	$                                  10,000
Fixed overhead	$39,600*25%	$               39,600	$        9,900	$                                (29,700)
Decrease in cost in BUY				$                                    5,300
Calipers				in Buy
		Make	Buy	Increase/(Decrease)
Purchase cost	80,000*$2.42		$   193,600	$                                193,600
Direct material		$               91,000		$                                (91,000)
Direct labor		$               41,000		$                                (41,000)
Variable overhead		$               16,000		$                                (16,000)
Fixed overhead	$29,000*25%	$               29,000	$        7,250	$                                (21,750)
Increase in cost in BUY				$                                  23,850
Seats and Calipers				in Buy
		Make	Buy	Increase/(Decrease)
Purchase cost			$   358,600	$                                358,600
Direct material		$            143,500		$                             (143,500)
Direct labor		$            114,500		$                             (114,500)
Variable overhead		$               30,000		$                                (30,000)
Logo Cost			$      10,000	$                                  10,000
Increase in Net Income			$   (20,000)	$                                (20,000)
Increase in cost in BUY				$                                  60,600