Question

Marty Monitors Ltd., a manufacturer of computer monitors, currently produces a 19-inch LCD monitor. The company's accounting department has reported the following annual costs of producing the LCD monitor internally:

Marty Monitors Annual Production Costs for 19-inch LCD Monitor
	Per Unit	8,000 Units
Direct Materials	$22.00	$176,000
Direct Labor	$10.00	$80,000
Variable Overhead	$8.00	$64,000
Production Supervisor's Salary	$13.00	$104,000
Depreciation of LCD manufacturing equipment	$9.00	$72,000
Allocated Fixed Overhead	$9.00	$72,000
Total Cost	$71.00	$568,000

An external supplier has offered to provide Marty Monitors 8,000 units of the same LCD monitor per year at a price of $52 each.

Also consider the following information:

• The LCD manufacturing equipment has no salvage value and has no other use aside from producing the 19-inch LCD monitors. It cannot be sold.
• The fixed overhead costs allocated to the LCD monitors are common to all items produced in the factory.
• The production supervisor will take over duties in another department if the monitors are purchased from the external supplier. If this is the case, his annual salary will drop to $93,600.

Should the company continue manufacturing the monitors internally or begin purchasing them from the external supplier?

Complete the Table Below:

Do not enter dollar signs or commas in the input boxes. Round all answers to 2 decimal places. Jenson Monitors Make or Buy Analysis Production Cost Per Unit Per Unit Differential Cost Make Buy Total Differential Cost (8,000 Units) Make Buy A Direct Materials $22.00 $ $ $ $ Direct Labor $10.00 $ $ $ Variable Overhead $8.00 $ Supervisor's Salary $13.00 $ $ $ Depreciation of Equipment (sunk) $9.00 $ $ $ $ Allocated Fixed Overhead (common) $9.00 $ GA $ Outside Purchase Price $ $ $ $ Total Relevant Cost $71.00 $ $ $ $