Assume the following cost data relate to the decision to produce Total units expected to be...
|
Assume the following cost data relate to the decision to produce |
||
|
Total units expected to be produced or bought from the market = 10,000 |
||
|
Total Costs |
Unit Cost |
|
|
Direct materials |
20,000 |
2.00 |
|
Direct labor |
25,000 |
2.50 |
|
Variable overhead |
15,000 |
1.50 |
|
Fixed overhead (non-avoidable) |
24000 |
2.40 |
|
Fixed overhead (avoidable) |
26,000 |
2.60 |
|
Purchase cost |
86,000 |
|
Should the company produce the product internally?
| a. |
Yes |
|
| b. |
No |
|
| c. |
Indifferent to to make or to buy |
|
| d. |
Yes if the market price covers the fixed costs per units |
Homework Answers
To find out whether the company should make or buy, we ned to do cost analysis
- Cost if purchased from market= $86000
- Cost if produced internally- DIrect material+Direci labur+variable overhead+avoidable fixed cost= 20000+25000+15000+26000= $86000
- Note that when making such decision, unavoidable fixed costs are not considered as they will continue to incur irrespective of the decision.
- Hence, The company is indifferent to buy because under both, the costs are same
Add Answer to:
Assume the following cost data relate to the decision to
produce
Total units expected to be...
Assume the following cost data relate to the decision to produce Total units expected to be...
Assume the following cost data relate to the decision to produce Total units expected to be produced or bought from the market = 10,000 Total Costs Unit Cost Direct materials 20,000 2.00 Direct labor 25,000 2.50 Variable overhead 15,000 1.50 Fixed overhead (non-avoidable) 24000 2.40 Fixed overhead (avoidable) 26,000 2.60 Purchase cost 86,000 Should the company acquire the product form the market? a. Yes b. No c. Indifferent to to make or to buy d. Yes if the market price...
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Business Decision Case The following total cost data are for Ralston Manufacturing Company, which has a...
Business Decision Case The following total cost data are
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at normal capacity of production
Solution 6.1
y-intercept 5 Total fixed costs of $5.000
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1.
2. what incremental cost will martinez incur if it increases
production from 10,000 to 10,001 units?
16 Martinez Company's relevant range of production is 7,500 units to 12,500 units. When it produces and sells 10,000 units, its average costs per unit are as follows: Average Cost Part 14 of 15 per Unit Direct materials Direct labor Variable manufacturing overhead Fixed manufacturing overhead Fixed selling expense Fixed administrative expense Sales commissions Variable administrative expense $6.00 $3.50 $1.50 $4.00 $3.00 10...
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for Ralston Manufacturing Company,
which has a normal capacity per period of 400,000 units
of product that sell for $18 each. For the
foreseeable future, regular sales volume should continue
at normal capacity of production
Solution 6.1
y-intercept 5 Total fixed costs of $5.000
Slope 5 Variable cost per unit of approximately $0.50
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Total cost 5 ($0.50 3 # of water bottle cages) 1
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