ch12-AFM102s2012

The 30 unit product cost is based on 20000 parts

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Unformatted text preview: . 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? Should we accept the supplier’s offer? Managerial Accounting 12-19 The Make or Buy Decision The special equipment has no The special equipment has no rresale value and is a sunk cost. esale value and is a sunk cost. 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 Not avoidable; irrelevant. If the product is dropped, it will Not avoidable; irrelevant. If the product is dropped, it will be reallocated to other products. be reallocated to other products. Should we make or buy part 4A? Managerial Accounting 12-20 The Make or Buy Decision: Opportunity Cost An opportunity cost is the benefit that is foregone as a result of pursuing some course of action. Opportunity costs are not actual dollar outlays and are not recorded in the formal a...
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This test prep was uploaded on 04/09/2014 for the course AFM 102 at Waterloo.

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