ACTG2020_Week5 2014 Ch12CMD (1)

Realize profits lo 2 the make or buy decision an

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Unformatted text preview: ctures part 4A that is used in one of its products. Direct materials Direct labour Variable overhead Depreciation of special equip. Supervisor's salary General factory overhead Unit product cost $ 9 5 1 3 2 10 $ 30 LO 2 The Make or Buy Decision The special equipment used to manufacture part 4A has no resale value. The total amount of general factory overhead, which is allocated on the basis of direct labour hours, would be unaffected by this decision. The $30 unit product cost is based on 20,000 parts produced each year. An outside supplier has offered to provide the 20,000 parts at a cost of $25 per part. Should we accept the supplier’s offer? LO 2 The Make or Buy Decision Cost Per Unit Outside purchase price $ 25 Direct materials Direct labour Variable overhead Depreciation of equip. Supervisor's salary General factory overhead Total cost $ 9 5 1 3 2 10 $ 30 Cost of 20,000 Units Buy Make $ 500,000 180,000 100,000 20,000 40,000 $ 340,000 $ 500,000 Should we make or buy part 4A? LO 2 Opportunity Cost An opportunity cost is the benefit that is foregone as a result of pursu...
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This note was uploaded on 03/28/2014 for the course ACTG 2020 taught by Professor Lizfarrel during the Spring '11 term at York University.

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