1.) | ||||||
Particulars | Make | Particulars | Buy | |||
Relevant Cost | Relevant Cost | |||||
Direct Material | $ 13.00 | Purchase Price | $ 30.00 | |||
Direct Labour | $ 9.00 | |||||
Variable manufacturing overhead | $ 3.00 | |||||
Fixed Manufacturing Overhead Traceable | $ 2.00 | |||||
TOTAL | $ 27.00 | TOTAL | $ 30.00 | |||
NOTE: It is assumed Supervisory Salary is Fixed and hence even when purchase option is selected, it will continue to occur. Hence, it is not relevant cost for Make-Buy Decision. Even if it is considered Relevant, the decision would remain unchanged as Make Cost would be $28($27+$2)and buy would be $30. | ||||||
Disadvantage per unit in buying | =$30-$27 | $ 3 | ||||
Total Disadvantage | =$3*13000 | $ 39,000 | ||||
2.) | ||||||
Since the outside supplier's offer is causing an additional loss of $39,000, the same shall not be accepted. | ||||||
3.) | ||||||
Margin of New Product | $ 1,30,000 | |||||
Total Disadvantage of Purchasing | $ 39,000 | |||||
Hence Net Advantage | =$130000-$39000 | $ 91,000 | ||||
4.) | ||||||
Since the outside supplier's offer is causing an additional margin of $91,000, the same shall be accepted. | ||||||
Troy Engines, Ltd., manufactures a variety of engines for use in heavy equipment. The company has...
Troy Engines, Ltd., manufactures a variety of engines for use in heavy equipment. The company has always produced all of the necessary parts for its engines, including all of the carburetors. An outside supplier has offered to sell one type of carburetor to Troy Engines, Ltd., for a cost of $36 per unit. To evaluate this offer, Troy Engines, Ltd., has gathered the following information relating to its own cost of producing the carburetor internally: 15,000 Units Per Unit Year...
Troy Engines, Ltd., manufactures a variety of engines for use in heavy equipment. The company has always produced all of the necessary parts for its engines, including all of the carburetors. An outside supplier has offered to sell one type of carburetor to Troy Engines, Ltd., for a cost of $34 per unit. To evaluate this offer, Troy Engines, Ltd., has gathered the following information relating to its own cost of producing the carburetor internally: 19,000 Units Per Per Unit...
2 Troy Engines, Ltd., manufactures a variety of engines for use in heavy equipment. The company has always produced all of the necessary parts for its engines, Including all of the carburetors. An outside supplier has offered to sell one type of carburetor to Troy Engines, Ltd., for a cost of $33 per unit. To evaluate this offer. Troy Engines, Ltd., has gathered the following Information relating to its own cost of producing the carburetor internally: 5 Joints Unit eBook...
Troy Engines, Ltd., manufactures a variety of engines for use in heavy equipment. The company has always produced all of the necessary parts for its engines, including all of the carburetors. An outside supplier has offered to sell one type of carburetor to Troy Engines, Ltd., for a cost of $30 per unit. To evaluate this offer, Troy Engines, Ltd., has gathered the following information relating to its own cost of producing the carburetor internally: Direct materials Direct labor Variable...
Troy Engines, Ltd., manufactures a variety of engines for use in heavy equipment. The company has always produced all of the necessary parts for its engines, including all of the carburetors. An outside supplier has offered to sell one type of carburetor to Troy Engines, Ltd., for a cost of $30 per unit. To evaluate this offer, Troy Engines, Ltd has gathered the following information relating to its own cost of producing the carburetor internally: Direct materials Direct labor Variable...
Troy Engines, Ltd., manufactures a variety of engines for use in heavy equipment. The company has always produced all of the necessary parts for its engines, including all of the carburetors. An outside supplier has offered to sell one type of carburetor to Troy Engines, Ltd., for a cost of $32 per unit. To evaluate this offer, Troy Engines, Ltd has gathered the following information relating to its own cost of producing the carburetor internally Direct materials Direct labor Variable...
Troy Engines, Ltd., manufactures a variety of engines for use in heavy equipment. The company has always produced all of the necessary parts for its engines, including all of the carburetors. An outside supplier has offered to sell one type of carburetor to Troy Engines, Ltd., for a cost of $30 per unit. To evaluate this offer, Troy Engines, Ltd., has gathered the following information relating to its own cost of producing the carburetor internally: Direet materials Direct labor Variable...
Troy Engines, Ltd., manufactures a variety of engines for use in heavy equipment. The company has always produced all of the necessary parts for its engines, including all of the carburetors. An outside supplier has offered to sell one type of carburetor to Troy Engines, Ltd., for a cost of $34 per unit. To evaluate this offer, Troy Engines, Ltd., has gathered the following information relating to its own cost of producing the carburetor internally: Direct materials Direct labor Variable...
Troy Engines, Ltd., manufactures a variety of engines for use In heavy equipment. The company has always produced all of the necessary parts for Its engines, Including all of the carburetors. An outside suppller has offered to sell one type of carburetor to Troy Engines, Ltd., for a cost of $40 per unit. To evaluate thls offer, Troy Engines, Ltd., has gathered the following information relating to Its own cost of producing the carburetor Internally: 15,808 Units Per Direct materials...
Troy Engines, Ltd., manufactures a variety of engines for use in heavy equipment. The company has always produced all of the necessary parts for its engines, including all of the carburetors. An outside supplier has offered to sell one type of carburetor to Troy Engines, Ltd., for a cost of $33 per unit. To evaluate this offer, Troy Engines, Ltd., has gathered the following information relating to its own cost of producing the carburetor internally: 18,000 Units Per Unit Year...