ACG Unit 3 IP - 1 RUNNING HEAD: UNIT 3 INDIVIDUAL PROJECT...

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1 RUNNING HEAD: UNIT 3 INDIVIDUAL PROJECT Unit 3 Individual Project Lorraine Huff AIU Online April 18, 2010
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2 1. Should the Minnetonka Corporation make or buy the bindings? Show calculations to support your answer. The purchase price of the bindings from the subcontractor would be $10.50 per pair. $100,000 fixed charge Direct Labor: $35 - $3.50 = $31.50 Direct Material: $30 – $6.00 = $24 Total Overhead: $15 - $1 = $14 Total: $80 - $69.50 = $10.50 Direct Labor - $35 X 10% = $3.50 Direct Material - $30 X 20% = $6.00 Total Overhead = $15. To find the variable overhead, divide 100,000 by 10,000 and get an answer of 10. $10 X10% = $1.00 Cost per pair to make Direct Labor - $.0035 Direct Material - $.003 Variable Overhead - $10 Total Overhead $.0015 Total $10.008 or $10.01 Minnetonka Corporation should make their own bindings. 2. What would be the maximum purchase price acceptable to the Minnetonka Corporation for the bindings? Support your answer with an appropriate explanation. Direct Labor: $35 - $3.50 = $31.50
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ACG Unit 3 IP - 1 RUNNING HEAD: UNIT 3 INDIVIDUAL PROJECT...

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