Solution
Financial advantage of making | $ 45,600 |
Working
Differential Analysis | ||
Make | Buy | |
Direct material | $ 380,000 | |
Direct labor | $ 152,000 | |
Variable Overheads | $ 38,000 | |
Fixed overhead | $ 144,400 | |
Purchase price | $ 760,000 | |
Total relevant Cost | $ 714,400 | $ 760,000 |
.
Notes |
1. Depreciation will not be considered for calculating relevant cost. |
2. Supervisor salary is relavant cost even though it’s a fixed cost . Because this cost is avoidable. |
3. The Amount of rent would remain the same whichever option is selected so its also a Irrelevant cost. |
Futura Company purchases the 76,000 starters that it installs in its standard line of farm tractors...
Futura Company purchases the 76,000 starters that it installs in its standard line of farm tractors from a supplier for the price of $10.60 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 $11.40 as shown below: Per Unit Total Direct...
Futura Company purchases the 63,000 starters that it installs in its standard line of farm tractors from a supplier for the price of $11.00 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 $11.40 as shown below: Per Unit Total Direct...
Futura Company purchases the 55,000 starters that it installs in its standard line of farm tractors from a supplier for the price of $11.40 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 $12.20 as shown below: Total Direct materials 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 $...
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 61,000 starters that it installs in its standard line of farm tractors from a supplier for the price of $10.50 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 $11.00 as shown below: Per Unit Total Direct...
Futura Company purchases the 73,000 starters that it installs in its standard line of farm tractors from a supplier for the price of $11.00 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 $12.20 as shown below Per Total Unit $...
Futura Company purchases the 75,000 starters that it installs in its standard line of farm tractors from a supplier for the price of $12.90 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 $13.20 as shown below: Per Unit Total Direct...
Futura Company purchases the 78,000 starters that it installs in its standard line of farm tractors from a supplier for the price of $13.20 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 $13.50 as shown below: Total Direct materials 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 Per Unit $ 6.00...