Ch07 adj Werner Jones Mgt Acctg PP97 2003

Buying services products or components buying from

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Unformatted text preview: 3e Werner/Jones 7 ­ 24 LO4 Make or Buy Decisions • Often companies purchase subcomponents Often instead of manufacturing them. • Buying services, products, or components Buying from outside vendors instead of producing them is called outsourcing. ©2009 Michael Werner and Kumen Jones, Introduction to Management Accounting, 3e Werner/Jones 7 ­ 25 LO4 Make or Buy Decisions • The basic make or buy question is whether The a company should make its own parts to be used in its products or buy them from vendors. ©2009 Michael Werner and Kumen Jones, Introduction to Management Accounting, 3e Werner/Jones 7 ­ 26 LO4 Gather Relevant Information • The product manager of Microbake is The approached by an outside vendor offering to supply a timer for $12. • Currently Microbake makes the timer. Currently • The company uses 80,000 timers each year. The • The cost sheets indicate that each The timer costs $14 to produce. ©2009 Michael Werner and Kumen Jones, Introduction to Management Accounting, 3e Werner/Jones 7 ­ 27 LO4 Gather Relevant Information Cost per Unit Direct material Direct labor Variable overhead Fixed overhead Total costs Total Cost for 80,000 Units $5 4 1 4 $14 $ 400,000 320,000 80,000 320,000 $1,120,000 ©2009 Michael Werner and Kumen Jones, Introduction to Management Accounting, 3e Werner/Jones 7 ­ 28 LO4 Ga...
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This note was uploaded on 03/16/2014 for the course ACC 212 taught by Professor Quintanna during the Spring '08 term at University of Miami.

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