Ch07 adj Werner Jones Mgt Acctg PP97 2003

The essential question is the difference in the

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Unformatted text preview: ther Relevant Information • Although the $14 unit cost shown seemingly Although indicates that the company should buy, the answer is rarely so obvious. • The essential question is the difference in The expected future costs between the alternatives. ©2009 Michael Werner and Kumen Jones, Introduction to Management Accounting, 3e Werner/Jones 7 ­ 29 LO4 Selecting Relevant Costs Future? Direct material Differs? Relevant? yes yes yes ©2009 Michael Werner and Kumen Jones, Introduction to Management Accounting, 3e Werner/Jones 7 ­ 30 LO4 Relevant Cost Comparison Make Cost to purchase Direct material Direct labor Variable overhead Total relevant costs Buy $960,000 $400,000 320,000 80,000 $800,000 $960,000 $160,000 in favor of making the oven timers in-house ©2009 Michael Werner and Kumen Jones, Introduction to Management Accounting, 3e Werner/Jones 7 ­ 31 LO4 Relevant Cost Comparison With Fixed Costs Shown Make Cost to purchase Direct material Direct labor Variable overhead Fixed overhead Total relevant costs Buy $ 960,000 $ 400,000 320,000 80,000 320,000 $1,120,000 320,000 $1,280,000 $160,000 in favor of making the oven timers in-house ©2009 Michael Werner and Kumen Jones, Introduction to Management Accounting, 3e Werner/Jones 7 ­ 32 C...
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