Question

D E 1 2 B Alanco, Ine. manufactures a variety of products and is currently maunfacturing all of its own component parts. An outside supplier has offered to sell one of those components to Alanco. To evaluate this offer, the following information has been gathered relating to the cost of producing the component internally: 4 S 9 Direct materials 4.00 Direct labor 6.00 7 Variable manufacturing overhead 2.00 Fixed manufacturing overhead, direct 5,00 Fixed manufacturing overhead, common but allocated 8.00 10 Total cost S 25.00 11 12 Supplier price S 21.00 13 14 Units used per year 12,000 15 16 *The fixed manufacturing overhead, direct 17 Depreciation of equipment (no resale value) 30% 18 Supervisor salary 70% 19 20 1. Assuming the company has no alternative use for the facilities now being used to produce the 21 component, complete the following analysis to determine if the outside supplier's offer should be accepted. 22 23 Per Unit Differential Cost Total for 12,000 units 24 Make Buy Make Buy 25 26 Cost of purchasing 27 Direct materials 28 Direct labor 29 Variable manufacturing overhead 30 Fixed manufacturing overhead, traceable 31 Fixed manufacturing overhead, common 32 Total costs 33 34 Based on this analysis, write an if statement to determine if Alanco should make or buy the component. 35 36 Alanco should the component

Answer 1

		Per Unit Differential Cost		Total for 12,000 units
1		Make	Buy	Make	Buy
	Outside purchase price		$21		$252,000
	Direct Materials	$4.00		$48,000
	Direct Labor	$6.00		$72,000
	Variable manufacturing overhead	$2.00		$24,000
	Fixed manufacturing overhead, traceable	$3.50		$42,000
	Fixed manufacturing overhead, common	$0.00		$0
	Total Cost	$15.50		$186,000	$252,000
2	Alanco should make the component