Chapter 13 Practice Questions Solutions

Chapter 13 Practice Questions Solutions -...

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36904ea1249d5ee1ba6b5ab9ad320391709ba425.doc Chap 13 Relevant Costing Practice Qs Answer Key 1. Lindon Company uses 5,000 units of Part X each year as a component in the assembly of one of its products. The company is presently producing Part X internally at a total cost of $80,000 as follows: Direct materials. ............................................................................................. $18,00 0 Direct labor. ................................................................................................... 20,000 Variable manufacturing overhead. ................................................................. 12,000 Fixed manufacturing overhead. ..................................................................... 30,00 0 Total costs. ..................................................................................................... $80,00 0 An outside supplier has offered to provide Part X at a price of $13 per unit. If Lindon Company stops producing the part internally, one-third of the fixed manufacturing overhead would be eliminated. Prepare an analysis showing the annual advantage or disadvantage of accepting the outside supplier's offer. Answer: Make Buy Outside purchase price $ 65,000 DM $ 18,000 DL 20,000 VOH 12,000 FOH * 10,000 ________ _________ Total $ 60,000 $ 65,000 1/3 of $ 30,000 Conclusion: Make, net advantage is $ 5,000 --------------------------------------------------------------------------------------------------------------------
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This note was uploaded on 04/22/2008 for the course ACCT 2251 taught by Professor Lilysieux during the Winter '07 term at CSU East Bay.

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Chapter 13 Practice Questions Solutions -...

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