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. Short-Term Decisions manufactures a variety of parts that the company can use to produce metal lill Fabricators fixtures. its manufacturing facility in Ohio. At a recent 11%of its fixed overhead costs assigned to the M2 part will not continue The M2 part is a popular universal part used in the production of several other parts ar meeting, the managerial accountant reported that if Hill Fabricators decides to outsource the production of the M2 part at $50 per unit to its competitor, Mason Manufacturing. The managerial accountant at Hill Fabricators presented the following data that represents the cost to produce 1,100 units of the M2 part in-bouse Hill Fabricators Monthly Analysis: Paut M2 $30.000 $4000 36.000 $12000 Disect materials Disect labor Pised ovethead costs Required: Prepare an increnmental analysis to determine whether Hill should make or continue to buy the M2 part Should they make or buy the part tHill outsources the production of part M2, management expects to be able to rent out the capacity of its factory for $8,000 per month. Does this change your answer to part Support your answer with calculations entily one qualitative factors that Hill should consider in making this decision

Answer 1

solution: a) cost of buying (1100 *50) Direct material direct labor variable overhead cost avoidable fixed overhead Incremental cost of making Incremental income/(loss) 55000 30000 4000 16000 3680 Decision: Making is cheaper than buying. b) cost of buying (1100 50) Rent Direct material direct labor variable overhead cost avoidable fixed overhead Incremental cost of making Incremental income/(loss) 55000 8000 30000 4000 16000 4320 Decision: Buying is cheaper than making. company should ensure that the quality of part M2 is not compromised if outsourced to suplier ト 커 . Sheet1 892 .. Sheet1 893 ( Sheet1 894 / Sheet1 895 . Sheet1 896 ( Sheet1 897 (Sheet1 898 . Sheet1899./2 ENG 1809 US 09/05/2018