Relevant costs to decision-making , accounting, Basic Statistics

Foster Company makes 20,000 units per year of a part it uses in the products it manufactures. The unit product cost of this part is computed as follows:
Direct materials $24.70
Direct labour 16.30
Variable manufacturing overhead 2.30
Fixed manufacturing overhead 13.40
Unit product cost $56.70

An outside supplier has offered to sell the company all of these parts it needs for $51.80 a unit.
If the company accepts this offer, the facilities now being used to make the part could be used
to make more units of a product that is in high demand. The additional contribution margin on
this other product would be $44,000 per year.
If the part were purchased from the outside supplier, all of the direct labour cost of the part
would be avoided. However, $5.10 of the fixed manufacturing overhead cost being applied to
the part would continue even if the part were purchased from the outside supplier. This fixed
manufacturing overhead cost would be applied to the company''s remaining products.
Required [14 marks]:
i. How much of the unit product cost of $56.70 is relevant in the decision of whether to
make or buy the part? [5 marks]
ii. What is the net total dollar advantage (disadvantage) of purchasing the part rather than
making it? [4 marks]
iii. What is the maximum amount the company should be willing to pay an outside supplier
per unit for the part if the supplier commits to supplying all 20,000 units required each
year? [5 marks]
Posted Date: 3/2/2012 2:26:13 AM | Location : United States







Related Discussions:- Relevant costs to decision-making , accounting, Assignment Help, Ask Question on Relevant costs to decision-making , accounting, Get Answer, Expert's Help, Relevant costs to decision-making , accounting Discussions

Write discussion on Relevant costs to decision-making , accounting
Your posts are moderated
Related Questions
Northern Hi-Tec Electronics Limited manufactures six computer peripheral devices: internal modems , external modems , circuit boards , CD drives , hard disk drives , and memo

A second file on DocDepot named Marks.mtp contains the final exam percentages of students in ADM2304A in the Fall 2011 semester. Assume that the class can be considered a random sa

Question: (a) Suppose that 100 tires made by Bridgestone last on average 21,819 miles with a standard deviation of 1,295 miles. Test the null hypothesis µ = 22, 000 miles again

HOW TO PREPARE INCOMPLETE ACCOUNTS CORRECTLY?

First of all, thank you very much for your help. I have a mixes data base, categorial variable, liclekt scale on 5 and 4, and continous variable, and several dummy. I would need h

Hanks Western Wear is a western hat retailer in Lubbock, TX.  Though Hanks carries various styles of western hats, every hat has approximately the similar price and invoice (purcha

Describe portfolio ratio, i need assignment help in portfolio ratio based questions.

SCENARIO It is proposed to construct a 3m diameter, 50m long tunnel, heading 0950, through the andesite lava flow at Maori Bay (Muriwai). As part of the preliminary investigati

It is known that the average height of a man residing in the Canada is 174 cm and the standard deviation is 8 cm. Assume the heights are normally distributed. To test the hypothesi