Question

جرد حيازة هاتف أو أية أجهزة الكترونية أخرى تعتبر مكاو Answer the following questions. All sale (CLO4) ( O Question u estions. All salons must appear on the w 1: (5 points) s heel am Corporation uses pant Xa18 in one of its products. The company Department reports the following costs of producing the 16.000 are needed every year. CASIO Per Unit Direct materials Direct labor Variable overhead Supervisor's salary Depreciation of special equipment Allocated general overhead.. An outside supplier has offered to make the part and sell it to the company for $28.09 cach. If this offer is accepted the supervisor's salary and all of the variable costs including direct labor, can be avoided. The special equipment used to make the part was purchased many years ago and has no savage value or other use. The allocated general overhead represents fixed costs of the entire company. If the outside supplie's ofler were accepted, only $22,000 of these allocated general overhead costs would be avoided. In addition, the space used to produce part GIS could be used to make more of one of the company's other products, generating an additional segment margin of $22,000 per year for that product. Required: Which alternative should the company choose? Direct materals 2.90

Answer 1

If the outside supplier's offer was accepted then,

Cost of the part required = 28*16000 = 448000

Savings in general overhead cost =22000

Additional margin earned from other product = 22000

Net cost = 448000 - 22000 - 22000 = 404000

If the Adam corporation produces instead of buying from outside supplier's then,

Relevant cost of producing = (2.9+3.9+6.7+7.2)*16000 = 331200

Opportunity cost of not being able to produce one of the company's other product = 22000

Net cost = 331200 + 22000 = 353200

Company should choose to produce the parts rather than buying from outside supplier's as the net cost is lower if it produces than buying from outside supplier.