Requirement 1
Financial (Disadvantage) | $ (102,000.00) |
Working
Statement of Cost Analysis(17000 Units) | |||
Make | Buy | Inremental (cost) or benefit | |
Purchase Price | $ - | $ 544,000.00 | $ (544,000.00) |
Direct Material | $ 238,000.00 | $ - | $ 238,000.00 |
Direct labor | $ 136,000.00 | $ - | $ 136,000.00 |
Variable Manufacturing Overheads | $ 51,000.00 | $ - | $ 51,000.00 |
Fixed Manufacturing Overheads,Avoidable | $ 17,000.00 | $ 17,000.00 | |
Opportunity cost | $ - | ||
Total Relevant Cost | $ 442,000.00 | $ 544,000.00 | $ (102,000.00) |
Requirement 2
No
The offer should be rejected
Requirement 3
Financial Advantage | $ 68,000.00 |
Working
Statement of Cost Analysis(17000 Units) | |||
Make | Buy | Inremental (cost) or benefit | |
Purchase Price | $ - | $ 544,000.00 | $ (544,000.00) |
Direct Material | $ 238,000.00 | $ - | $ 238,000.00 |
Direct labor | $ 136,000.00 | $ - | $ 136,000.00 |
Variable Manufacturing Overheads | $ 51,000.00 | $ - | $ 51,000.00 |
Fixed Manufacturing Overheads,Avoidable | $ 17,000.00 | $ 17,000.00 | |
Opportunity cost | $ 170,000.00 | $ 170,000.00 | |
Total Relevant Cost | $ 612,000.00 | $ 544,000.00 | $ 68,000.00 |
Requirement 4
Yes
The offer should be accepted.
* Supervisor salary is avoidable fixed cost. It will be saved if carburator is purchased from outside but depreciation will still be the same , so 2/3rd of fixed cost still occurs when Carburator is purchased. Which means Depreciation is Irrelevant cost and hence excluded from relevant cost calculation. |
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 $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: 17,000 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 $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 $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 $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: Per Unit 17,000 Units Per...
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: Per Unit 17,000 Units per...
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: Per Unit 17,000 Units Per...
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 $35 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 $35 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 $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 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...