Teich inc is considering whether to continue to make a

Reference no: EM13576140

Teich Inc. is considering whether to continue to make a component or to buy it from an outside supplier. The company uses 15,000 of the components each year. The unit product cost of the component according to the company's absorption cost accounting system is given as follows:

Direct materials $ 7.90
Direct labor 2.10
Variable manufacturing overhead 1.10
Fixed manufacturing overhead 4.00
Unit product cost $15.10

Assume that direct labor is a variable cost. Of the fixed manufacturing overhead, 10% is avoidable if the component were bought from the outside supplier; the remainder is not avoidable. In addition, making the component uses 3 minutes on the machine that is the company's current constraint. If the component were bought, this machine time would be freed up for use on another product that requires 6 minutes on the constraining machine and that has a contribution margin of $8.10 per unit.

1.When deciding whether to make or buy the component, what cost of making the component should be compared to the price of buying the component?

Reference no: EM13576140

Questions Cloud

If a purchase of supplies for 1341 was mistakenly recorded : if a purchase of supplies for 1341 was mistakenly recorded as a credit to supplies but the cash paid for the supplies

Mexican peso is expected to depreciate by 30 percent : you are the cfo of a u.s. firm whose wholly owned subsidiary in mexico manufactures component parts for your u.s.

Te received signal of a communication system r s n : q1. let wi be the power received by the mobile at distance i from the base station. the probability distribution of the

Received 9900 cash from students-of which 3600 is for : jims gymnastics trainings operations for the month of october are summarized as followsbull provided 7000 of training

Teich inc is considering whether to continue to make a : teich inc. is considering whether to continue to make a component or to buy it from an outside supplier. the company

Using the element definition from the conceptual framework : in mcdonalds 2009 10k report revenues from franchised restaurants consisted of rents being 4.8 million. future minimum

Evaluate the projects efficacy is this facility worthwhile : bender guitar corporation a manufacturer of custom electric guitars is contemplating a 1000000 investment in a new

Which depreciation method does amazoncom use for reporting : refer to the amazon.com financial statements including notes 1 and 3 in appendix a at the end of this book. answer the

Find the spot exchange rate for japanese yen how many : you are assigned the duty of ensuring the availability of 100 million japanese yen for a payment scheduled for

User Account

All Pages