Calculation of Financial Advantage/Disadvantage of making the 65,000 starters instead of buying them from an outside supplier:
1. Cost of starters from outside supplier = 65,000*$12.5 = $812,500
2. Cost of starters when produced inhouse:
Particulars | Amount ($) | Comments |
Direct Material | 4,55,000 | Relevant for decision-making |
Direct Labor | 1,43,000 | Relevant for decision-making |
Supervision | 1,04,000 | Relevant for decision-making because if starters are not produced inhouse, supervisor would not be required to be hired and hence it is an avoidable cost |
Depreciation | - | Fixed Cost, not relevant for decision-making |
Variable Manufacturing Overheads | 19,500 | Relevant for decision-making |
Rent | - | Fixed Cost, not relevant for decision-making |
Total Cost of producing Starters | 7,21,500 |
3. Therefore, financial advantage of producing starters = $812,500 - $7,21,500 = $91,000
Futura Company purchases the 65,000 starters that it installs in its standard line of farm tractors...
Futura Company purchases the 65,000 starters that it installs in its standard line of farm tractors from a supplier for the price of $12.10 per unit. Due to a reduction in output, the company now has idle capacity that could be used to produce the starters rather than buying them from an outside supplier. However, the company's chief engineer is opposed to making the starters because the production cost per unit is $12.90 as shown below: Direct materials Direct labor...
Futura Company purchases the 65,000 starters that it installs in its standard line of farm tractors from a supplier for the price of $12.30 per unit. Due to a reduction in output, the company now has idle capacity that could be used to produce the starters rather than buying them from an outside supplier. However, the company's chief engineer is opposed to making the starters because the production cost per unit is $12.30 as shown below Per Unit $ 6.00...
Futura Company purchases the 65,000 starters that it installs in its standard line of farm tractors from a supplier for the price of $10.80 per unit. Due to a reduction in output, the company now has idle capacity that could be used to produce the starters rather than buying them from an outside supplier. However, the company’s chief engineer is opposed to making the starters because the production cost per unit is $11.30 as shown below: Per Unit Total Direct...
Futura Company purchases the 65,000 starters that it installs in its standard line of farm tractors from a supplier for the price of $12.30 per unit. Due to a reduction in output, the company now has idle capacity that could be used to produce the starters rather than buying them from an outside supplier. However, the company's chief engineer is opposed to making the starters because the production cost per unit is $12.30 as shown below: Direct materials Direct labor...
Futura Company purchases the 65,000 starters that it installs in its standard line of farm tractors from a supplier for the price of S11.70 per unit. Due to a reduction in output, the company now has idle capacity that could be used to produce the starters rather than buying them from an outside supplier. However, the company's chief engineer is opposed to making the starters because the production cost per unit is $12.70 as shown below Per Unit Total $...
Futura Company purchases the 65,000 starters that it installs in its standard line of farm tractors from a supplier for the price of $12.30 per unit. Due to a reduction in output, the company now has idle capacity that could be used to produce the starters rather than buying them from an outside supplier. However, the company's chief engineer is opposed to making the starters because the production cost per unit is $12.30 as shown below: Per Unit $ 6.00...
Futura Company purchases the 76.000 starters that it installs in its standard line of farm tractors from a supplier for the price of $10.90 per unit. Due to a reduction in output, the company now has idle capacity that could be used to produce the starters rather than buying them from an outside supplier. However, the company's chief engineer is opposed to making the starters because the production cost per unit is $11.60 as shown below. Total Per Unit $...
Futura Company purchases the 64,000 starters that it installs in its standard line of farm tractors from a supplier for the price of $12.20 per unit. Due to a reduction in output, the company now has idle capacity that could be used to produce the starters rather than buying them from an outside supplier. However, the company's chief engineer is opposed to making the starters because the production cost per unit is $12.90 as shown below: Total Direct materials Direct...
Futura Company purchases the 80,000 starters that it installs in its standard line of farm tractors from a supplier for the price of $11.20 per unit. Due to a reduction in output, the company now has idle capacity that could be used to produce the starters rather than buying them from an outside supplier. However, the company’s chief engineer is opposed to making the starters because the production cost per unit is $12.00 as shown below: Per Unit Total Direct...
Futura Company purchases the 76.000 starters that it installs in its standard line of farm tractors from a supplier for the price of $10.90 per unit. Due to a reduction in output, the company now has idle capacity that could be used to produce the starters rather than buying them from an outside supplier. However, the company's chief engineer is opposed to making the starters because the production cost per unit is $11.60 as shown below. Total Per Unit $...