Second%20Chance%20Exam%20#2

Second%20Chance%20Exam%20#2 - 1/5 Questions 1 and 2 refer...

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1 / 5 Questions 1 and 2 refer to the following problem: X Company is considering buying a part next year that they currently produce. This year's total production costs for 11,050 units of this part were: Materials $41,548 Direct labor $35,139 Total overhead $64,422 Of the total overhead, $40,222 was variable; the fixed overhead was allocated to this part and will occur even if the part is bought from a supplier. A company has offered to supply this part for $6.99 per unit. X Company would have to inspect each part at a cost of $0.86 per unit. Estimated production next year is also 11,050 units, and if they buy the part, there is no alternative use of the resources currently involved in the production of the part. 1. If X Company buys the part, it will save Make: ($41,548 + $35,139 + $64,422) = $141,109 Buy: ($64,422 - $40,222) = $24,200 ($6.99 + $0.86) x 11,050 = $86,743 $141,109 – ($24,200 + $86,743) = $30,166 2. Assume that X Company can use the resources currently involved in the production of the part to make 8,000 units of a different product. The contribution margin for this product is $4.54 per unit, but some additional equipment would have to be rented for $18,000. The impact of this would be to reduce the costs of buying by 8,000 x $4.54 = $36,320 -$18,000 $18,320 Questions 3 and 4 refer to the following problem: X Company is considering buying a part next year that they currently produce. This year's per-unit production costs for 84,000 units of this part were: Materials $5.75 Direct labor $5.77 Total overhead $5.06 Of the total overhead, $1.39 was fixed. A company has offered to supply this part for $15.66 per unit. If X Company buys the part, 76% of total fixed overhead is unavoidable. Production next year is expected to increase to 87,300 units. If X Company buys the part, its idle resources will remain idle. 3. If X Company makes the part, it will save $13,009 Make 15.19(87,300) + $116,760 = $1,442,847 Buy 15.66(87,300) + $88,738 = $1,455,856 $1,455,856 - $1,442,847 = $13,009 4. X Company is uncertain about the demand in coming years. At what level of demand will X Company be indifferent between making and buying? 59,622 $5.06 - $1.39 = $3.67 (VOH) ($5.75 + $5.77 + $3.67)x + $116,760 = ($15.66)x + $116,760 x .76
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Second%20Chance%20Exam%20#2 - 1/5 Questions 1 and 2 refer...

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