201-SELF STUDY PROB-WEEK 10-S'12

201-SELF STUDY PROB-WEEK 10-S'12 -...

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#8%89: #8%;< .=>?@AB #8%89 2CDA >= ?EF PROBLEM 14-49 (20 MINUTES) The analysis prepared by the engineering, manufacturing, and accounting departments of CTR was not correct. However, their recommendation was correct, provided that potential labor-cost improvements are ignored. An incremental cost analysis similar to the following table should have been prepared to determine whether the pump should be purchased or manufactured. In the following analysis, fixed factory overhead costs and general and administrative overhead costs have not been included because they are not relevant; these costs would not increase, because no additional equipment, space, or supervision would be required if the pumps were manufactured. Therefore, if potential labor cost improvements are ignored, CTR should purchase the pumps because the purchase price of $68.00 is less than the $72.00 relevant cost to manufacture. Incremental cost analysis: Cost of 10,000 Unit Assembly Run Per Unit Purchased components . .................................................... $120,000 $12.00 Assembly labor . .................................................................. 300,000
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This note was uploaded on 02/23/2012 for the course MGMT 201 taught by Professor Rowe during the Spring '08 term at Purdue University-West Lafayette.

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201-SELF STUDY PROB-WEEK 10-S'12 -...

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