If starters are made then relevant cost of making is as follows:-
Direct Materials | 6 |
Direct labor | 2.8 |
Variable manufacturing overhead | 0.5 |
Total relevant cost p.u. | 9.3 |
Total cost of making 65000 starters = (9.3*65000) + 110500 = $715000
Note: Depreciation is a non cash item and irrelevant for decision making. Rent is a fixed cost and therefore it will also be irrelevant for decision making because the company anyway have to incur irrespective of buying or making starters.
If the starters are purchased from outside supplier then total cost will be = 65000*12.30 = $799500
Hence, there will be a financial advantage of 799500-715000 = $84,500 if the starters are made instead of buying from outside supplier.
Futura Company purchases the 65,000 starters that it installs in its standard line of farm tractors...
Futura Company purchases the 65,000 starters that it installs in its standard line of farm tractors from a supplier for the price of $12.30 per unit. Due to a reduction in output, the company now has idle capacity that could be used to produce the starters rather than buying them from an outside supplier. However, the company's chief engineer is opposed to making the starters because the production cost per unit is $12.30 as shown below Per Unit $ 6.00...
Futura Company purchases the 65,000 starters that it installs in its standard line of farm tractors from a supplier for the price of $12.30 per unit. Due to a reduction in output, the company now has idle capacity that could be used to produce the starters rather than buying them from an outside supplier. However, the company's chief engineer is opposed to making the starters because the production cost per unit is $12.30 as shown below: Per Unit $ 6.00...
Futura Company purchases the 65,000 starters that it installs in its standard line of farm tractors from a supplier for the price of $10.80 per unit. Due to a reduction in output, the company now has idle capacity that could be used to produce the starters rather than buying them from an outside supplier. However, the company’s chief engineer is opposed to making the starters because the production cost per unit is $11.30 as shown below: Per Unit Total Direct...
Futura Company purchases the 65,000 starters that it installs in its standard line of farm tractors from a supplier for the price of $12.50 per unit. Due to a reduction in output, the company now has idle capacity that could be used to produce the starters rather than buying them from an outside supplier. However, the company's chief engineer is opposed to making the starters because the production cost per unit is $12.40 as shown below. Total Per Unit $...
Futura Company purchases the 65,000 starters that it installs in its standard line of farm tractors from a supplier for the price of $12.10 per unit. Due to a reduction in output, the company now has idle capacity that could be used to produce the starters rather than buying them from an outside supplier. However, the company's chief engineer is opposed to making the starters because the production cost per unit is $12.90 as shown below: Direct materials Direct labor...
Futura Company purchases the 65,000 starters that it installs in its standard line of farm tractors from a supplier for the price of S11.70 per unit. Due to a reduction in output, the company now has idle capacity that could be used to produce the starters rather than buying them from an outside supplier. However, the company's chief engineer is opposed to making the starters because the production cost per unit is $12.70 as shown below Per Unit Total $...
Futura Company purchases the 66,000 starters that it installs in its standard line of farm tractors from a supplier for the price of $11.50 per unit. Due to a reduction in output, the company now has idle capacity that could be used to produce the starters rather than buying them from an outside supplier. However, the company’s chief engineer is opposed to making the starters because the production cost per unit is $12.30 as shown below: Per Unit Total Direct...
Futura Company purchases the 61,000 starters that it installs in its standard line of farm tractors from a supplier for the price of $10.50 per unit. Due to a reduction in output, the company now has idle capacity that could be used to produce the starters rather than buying them from an outside supplier. However, the company’s chief engineer is opposed to making the starters because the production cost per unit is $11.00 as shown below: Per Unit Total Direct...
Futura Company purchases the 70,000 starters that it installs in its standard line of farm tractors from a supplier for the price of $10.90 per unit. Due to a reduction in output, the company now has idle capacity that could be used to produce the starters rather than buying them from an outside supplier. However, the company's chief engineer is opposed to making the starters because the production cost per unit is $10.80 as shown below: Direct materials Direct labor...
Futura Company purchases the 70,000 starters that it installs in its standard line of farm tractors from a supplier for the price of $10.90 per unit. Due to a reduction in output, the company now has idle capacity that could be used to produce the starters rather than buying them from an outside supplier. However, the company's chief engineer is opposed to making the starters because the production cost per unit is $10.80 as shown below: Direct materials Direct labor...