Required 1 : | ||
Make | Buy | |
Direct materials | 304000 | |
Direct labor | 190000 | |
Variable manufacturing overhead | 38000 | |
Buying cost ( 19000 * 34 ) | 646000 | |
Fixed manufacturing overhead, traceable ( Supervisor's salary = 171000 * 1 / 3 ) | 57000 | |
Total relevant cost | 589000 | 646000 |
Note : Allocated fixed manufacturing overhead and depreciation of special equipment will appear in both the situations and will not affect the decision marking and hence the same is ignored in the calculation. |
Total relevant cost of making | 589000 |
Less : Total relevant cost of buying | 646000 |
Financial advantage (Disadvantage) | (57000) |
Required 2 : |
Answer : No |
Reason : As the outside supplier's offer is resulting in a financial disadvantage |
Required 3 : | ||
Make | Buy | |
Direct materials | 304000 | |
Direct labor | 190000 | |
Variable manufacturing overhead | 38000 | |
Buying cost ( 20000 * 36 ) | 646000 | |
Fixed manufacturing overhead, traceable ( Supervisor's salary = 180000 * 1 / 3 ) | 57000 | |
Less: Segment margin of the new product | 190000 | |
Total relevant cost | 589000 | 456000 |
Total relevant cost of making | 589000 |
Less : Total relevant cost of buying | 456000 |
Financial advantage (Disadvantage) | 133000 |
Required 4 : |
Answer : Yes |
Reason : As the outside supplier's offer is resulting in a financial advantage |
Troy Engines, Ltd., manufactures a variety of engines for use in heavy equipment. The company has...
Troy Engines, Ltd., manufactures a variety of engines for use in heavy equipment. The company has always produced all of the necessary parts for its engines, including all of the carburetors. An outside supplier has offered to sell one type of carburetor to Troy Engines, Ltd., for a cost of $34 per unit. To evaluate this offer, Troy Engines, Ltd., has gathered the following information relating to its own cost of producing the carburetor internally: 19,000 Units Per Per Unit...
Troy Engines, Ltd., manufactures a variety of engines for use in heavy equipment. The company has always produced all of the necessary parts for its engines, including all of the carburetors. An outside supplier has offered to sell one type of carburetor to Troy Engines, Ltd., for a cost of $30 per unit. To evaluate this offer, Troy Engines, Ltd., has gathered the following information relating to its own cost of producing the carburetor internally Per Unit $ 12 $...
Troy Engines, Ltd., manufactures a variety of engines for use in heavy equipment. The company has always produced all of the necessary parts for its engines, including all of the carburetors. An outside supplier has offered to sell one type of carburetor to Troy Engines, Ltd., for a cost of $34 per unit. To evaluate this offer, Troy Engines, Ltd., has gathered the following information relating to its own cost of producing the carburetor internally: 19,000 Units Per рer Unit...
Troy Engines, Ltd., manufactures a variety of engines for use in heavy equipment. The company has always produced all of the necessary parts for its engines, including all of the carburetors. An outside supplier has offered to sell one type of carburetor to Troy Engines, Ltd., for a cost of $36 per unit. To evaluate this offer, Troy Engines, Ltd. has gathered the following information relating to its own cost of producing the carburetor internally: Per Unit $ 17 10...
Troy Engines, Ltd., manufactures a variety of engines for use in heavy equipment. The company has always produced all of the necessary parts for its engines, including all of the carburetors. An outside supplier has offered to sell one type of carburetor to Troy Engines, Ltd., for a cost of $32 per unit. To evaluate this offer, Troy Engines, Ltd has gathered the following information relating to its own cost of producing the carburetor internally Direct materials Direct labor Variable...
Troy Engines, Ltd., manufactures a variety of engines for use In heavy equipment. The company has always produced all of the necessary parts for Its engines, Including all of the carburetors. An outside suppller has offered to sell one type of carburetor to Troy Engines, Ltd., for a cost of $40 per unit. To evaluate thls offer, Troy Engines, Ltd., has gathered the following information relating to Its own cost of producing the carburetor Internally: 15,808 Units Per Direct materials...
Troy Engines, Ltd., manufactures a variety of engines for use in heavy equipment. The company has always produced all of the necessary parts for its engines, including all of the carburetors. An outside supplier has offered to sell one type of carburetor to Troy Engines, Ltd., for a cost of $36 per unit. To evaluate this offer, Troy Engines, Ltd., has gathered the following information relating to its own cost of producing the carburetor internally: 15,000 Units Per Unit Year...
Troy Engines, Ltd., manufactures a variety of engines for use in heavy equipment. The company has always produced all of the necessary parts for its engines, including all of the carburetors. An outside supplier has offered to sell one type of carburetor to Troy Engines, Ltd., for a cost of $34 per unit. To evaluate this offer, Troy Engines, Ltd., has gathered the following information relating to its own cost of producing the carburetor internally: Direct materials Direct labor Variable...
Troy Engines, Ltd., manufactures a variety of engines for use in heavy equipment. The company has always produced all of the necessary parts for its engines, including all of the carburetors. An outside supplier has offered to sell one type of carburetor to Troy Engines, Ltd. for a cost of $35 per unit. To evaluate this offer, Troy Engines, Ltd., has gathered the following information relating to its own cost of producing the carburetor internally Direct materials Direct labor Variable...
2 Troy Engines, Ltd., manufactures a variety of engines for use in heavy equipment. The company has always produced all of the necessary parts for its engines, Including all of the carburetors. An outside supplier has offered to sell one type of carburetor to Troy Engines, Ltd., for a cost of $33 per unit. To evaluate this offer. Troy Engines, Ltd., has gathered the following Information relating to its own cost of producing the carburetor internally: 5 Joints Unit eBook...