The Green Machine Manufacturing Company has the option to make or buy a component part for one of its lawnmowers. The annual requirement is 25,000 units. A supplier is able to supply the parts for $12.25 per piece. Green Machine estimates that it will cost $700 to prepare the contract with the supplier. To make the parts in-house, Green Machine must invest $100,000 in capital equipment. They estimate it will cost $9.00 per piece to produce the part in-house. Carry all calculations out to two decimal places.
A) Less than or equal to 30,000
B) Greater than 30,000 but less than or equal to 35,000
C) Greater than 35000 but less than or equal to 40,000
D) Greater than 40,000 but less than or equal to 45,000
E) Greater than 45,000
A) Less than or equal to $365,000
B) Greater than $365,000 but less than or equal to $370,000
C) Greater than $370,000 but less than or equal to $375,000
D) Greater than $375,000
A) Buy the part
B) Make the part
C) Both
D) Neither
E) Not enough information
A) Less than or equal to $20,000
B) Greater than $20,000 but less than or equal to $25,000
C) Greater than $25,000 but less than or equal to $30,000
D) Greater than $30,000 but less than or equal to $35,000
E) Greater than $35,000
Break-even analysis is a technique by which business identify the sales volume when the total cost and total revenue is equal. So, the company neither makes profit nor loss.
Break-even analysis is important for business because it help in drafting good business plan by determining cost structure and the volume required to cover the cost in order to make profit.
The Green Machine Manufacturing Company has the option to make or buy a component part for...
The Green Machine Manufacturing Company has the option to make or buy a component part for one of its lawnmowers. The annual requirement is 25,000 units. A supplier is able to supply the parts for $10 per piece. Green Machine estimates that it will cost $1000 to prepare the contract with the supplier. To make the parts in-house, Green Machine must invest $100,000 in capital equipment. They estimate it will cost $8 per piece to produce the part in-house. Carry...
Harvey Manufacturing incurs the following costs to make 5,000 units of a sub-assembly part included in its finished product. Direct materials $10,000 Direct labor 20,000 Variable overhead 25,000 Fixed overhead 50.000 Included in the $50,000 of fixed overhead is $3,000 spent to rent production equipment that could be avoided if Harvey did not manufacture this part. If Harvey buys the part from an outside supplier, it could use factory resources to make another product which is estimated to have a...
Tex's Manufacturing Company can make 100 units of a necessary component part with the following costs: Direct Materials Direct Labor $120,000 25,000 Variable Overhead 45,000 Fixed Overhead 30,000 If Tex's Manufacturing Company can purchase the component externally for $190,000 and only $5,000 of the fixed costs can be avoided, what is the correct make-or-buy decision? Buy and save $5,000 Make and save $5,000 Make and save $15,000 Buy and save $15,000
C&A can either make a part in-house or buy it from a supplier. C&A needs 70,000 of this part each year. Consider the following cost data: Source Fixed cost Unit variable cost Make $10,125 $12.50 Buy $0 $14.75 Should C&A make or buy the product? At what quantity will C&A be indifferent towards making or buying the part? Should C&A make or buy the part if demand is 40,000 parts? Should C&A make of buy the part if demand is...
A New Jersey motorcycle manufacturer (Hot Sizzle) has the option to make or buy tires. The annual requirement is 22,000 tires. A supplier is able to supply the tires for $80 each. Hot Sizzle estimates that it costs $500 to prepare the contract with the supplier. To make the parts in-house, Hot Sizzle must invest $20,000 in capital equipment and estimates that the tires cost $50 each. Assuming that cost is the only criterion, use break-even analysis to determine whether...
Make-or-Buy Decision, Alternatives, Relevant Costs Each year, Basu Company produces 13,000 units of a component used in microwave ovens. An outside supplier has offered to supply the part for $1.31. The unit cost is: Direct materials $0.89 Direct labor 0.27 Variable overhead 0.07 Fixed overhead 2.10 Total unit cost $3.33 Required: 1. What are the alternatives for Basu Company? Make the part in house or buy the part externally 2. Assume that none of the fixed cost is avoidable. List...
19. Marathon Manufacturing Company can make 10,000 units of a necessary component part with the following costs per unit: Direct Materials $15 Direct Labor Variable Overhead Fixed Overhead Product cost per unit $55 Marathon Manufacturing Company can purchase the component externally for $38 per unit. Only 25% of the total fixed costs can be avoided. What is the correct make-or-buy decision in order to maximize net income? a. Make and save $12,000 6 Buy and save $12,000 C. Make and...
Make-or-Buy, Traditional Analysis Wehner Company is currently manufacturing Part ABS-43, producing 54,600 units annually. The part is used in the production of several products made by Wehner. The cost per unit for ABS-43 is as follows Direct materials Direct labor Variable overhead Fixed overhead $42.10 9.00 3.30 3.65 $58.05 Total Of the total fixed overhead assigned to ABS-43, $13,049 is direct fixed overhead (the annual lease cost of machinery used to manufacture Part ABS-43), and the remainder is common fixed...
Make-or-Buy, Traditional Analysis Wehner Company is currently manufacturing Part ABS-43, producing 57,500 units annually. The part is used in the production of several products made by Wehner. The cost per unit for ABS-43 is as follows: Direct materials $44.15 Direct labor 10.90 Variable overhead 3.00 Fixed overhead 4.70 Total $62.75 Of the total fixed overhead assigned to ABS-43, $15,180 is direct fixed overhead (the annual lease cost of machinery used to manufacture Part ABS-43), and the remainder is common fixed...
1110110uui DOULW115 101 PO01 PIUIII. EXERCISE 12–12 Make or Buy a Component [LO3] Royal Company manufactures 20,000 units of part R-3 each year for use on its production line. At this level of activity, the cost per unit for part R-3 is: Direct materials ......... Direct labor ...................... Variable manufacturing overhead........ Fixed manufacturing overhead ......... Total cost per part ..... $ 4.80 7.00 3.20 10.00 $25.00 An outside supplier has offered to sell 20,000 units of part R-3 each year...