1 2 3 4 5 6 7 Direct materials Direct labor 8 Variable manufacturing overhead 9 Fixed manufacturing overhead, traceable 10 Fixed manufacturing overhead, common but allocated 11 Total cost 12 13 25 26 27 Alanco, Inc. manufactures a variety of products and is currently maunfacturing all of its own component parts. An outside supplier has offered to sell one of those components to Alanco. To evaluate this offer, the following information has been gathered relating to the cost of producing the component internally: 28 29 30 31 32 33 34 Supplier price Units used per year *The fixed manufacturing overhead, traceable Depreciation of equipment (no resale value) Supervisor salary 14 15 16 17 18 19 20 21 Required: 22 1. Assuming the company has no alternative use for the facilities now being used to produce the component, 23 complete the following analysis to determine if the outside supplier's offer should be accepted. 24 (Use cells A6 to 819 from the given information to complete this question. Blank or zero value answers should be entered as =0.) 39 40 $4.00 6.00 2.00 5.00 Cost of purchasing Direct materials Direct labor Variable manufacturing overhead Fixed manufacturing overhead, traceable Fixed manufacturing overhead, common Total costs 8.00 $25.00 $21.00 12,000 30% 70% Per Unit Differential Make Cost Buy 35 36 37 2. Based on this analysis, determine if Alanco should make or buy the component. 38 Alanco should the component. 12,000 units Make Buy
1 2 3 4 5 6 7 Direct materials Direct labor 8 Variable manufacturing overhead 9 Fixed manufacturing overhead, traceable 10 Fixed manufacturing overhead, common but allocated 11 Total cost 12 13 25 26 27 Alanco, Inc. manufactures a variety of products and is currently maunfacturing all of its own component parts. An outside supplier has offered to sell one of those components to Alanco. To evaluate this offer, the following information has been gathered relating to the cost of producing the component internally: 28 29 30 31 32 33 34 Supplier price Units used per year *The fixed manufacturing overhead, traceable Depreciation of equipment (no resale value) Supervisor salary 14 15 16 17 18 19 20 21 Required: 22 1. Assuming the company has no alternative use for the facilities now being used to produce the component, 23 complete the following analysis to determine if the outside supplier's offer should be accepted. 24 (Use cells A6 to 819 from the given information to complete this question. Blank or zero value answers should be entered as =0.) 39 40 $4.00 6.00 2.00 5.00 Cost of purchasing Direct materials Direct labor Variable manufacturing overhead Fixed manufacturing overhead, traceable Fixed manufacturing overhead, common Total costs 8.00 $25.00 $21.00 12,000 30% 70% Per Unit Differential Make Cost Buy 35 36 37 2. Based on this analysis, determine if Alanco should make or buy the component. 38 Alanco should the component. 12,000 units Make Buy
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
Related questions
Question
![**Alanco, Inc. Evaluation of Component Production Costs**
Alanco, Inc. manufactures a variety of products and currently produces all its own component parts. An outside supplier has proposed selling one of these components to Alanco. To evaluate this offer, the following data about internal production costs have been gathered:
- **Direct materials:** $4.00
- **Direct labor:** $6.00
- **Variable manufacturing overhead:** $1.00
- **Fixed manufacturing overhead, traceable:** $7.00
- **Fixed manufacturing overhead, common but allocated:** $7.00
- **Total cost:** $25.00
- **Supplier price:** $21.00
- **Units used per year:** 12,000
*Note: The fixed manufacturing overhead, traceable includes:*
- **Depreciation of equipment (no resale value):** 30%
- **Supervisor salary:** 70%
**Required Analysis:**
1. Assuming the company has no alternative for the facilities currently used to produce the component, perform the following analysis to determine if purchasing from the supplier is advantageous.
(Use the provided data in cells A6 to B19. Enter blank or zero values as 0.)
### Analysis Table: Cost Comparison (Per Unit and for 12,000 Units)
| Cost Category | Per Unit Differential Cost | 12,000 Units |
|--------------------------------------------|----------------------------|--------------|
| **Cost of purchasing** | | |
| **Direct materials** | | |
| **Direct labor** | | |
| **Variable manufacturing overhead** | | |
| **Fixed manufacturing overhead, traceable**| | |
| **Fixed manufacturing overhead, common** | | |
| **Total costs** | | |
2. Based on this analysis, determine whether Alanco should make or buy the component.
**Conclusion:**
- **Alanco should [Make/Buy] the component.**
This structured analysis helps Alanco, Inc. assess whether they should continue making the component internally or purchase from an outside supplier by comparing all relevant costs.](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F84be77e3-7e2a-48d9-923c-45508700aa71%2F54b6000f-13c2-429a-8a02-f103a0713f20%2Fw33ci5v_processed.jpeg&w=3840&q=75)
Transcribed Image Text:**Alanco, Inc. Evaluation of Component Production Costs**
Alanco, Inc. manufactures a variety of products and currently produces all its own component parts. An outside supplier has proposed selling one of these components to Alanco. To evaluate this offer, the following data about internal production costs have been gathered:
- **Direct materials:** $4.00
- **Direct labor:** $6.00
- **Variable manufacturing overhead:** $1.00
- **Fixed manufacturing overhead, traceable:** $7.00
- **Fixed manufacturing overhead, common but allocated:** $7.00
- **Total cost:** $25.00
- **Supplier price:** $21.00
- **Units used per year:** 12,000
*Note: The fixed manufacturing overhead, traceable includes:*
- **Depreciation of equipment (no resale value):** 30%
- **Supervisor salary:** 70%
**Required Analysis:**
1. Assuming the company has no alternative for the facilities currently used to produce the component, perform the following analysis to determine if purchasing from the supplier is advantageous.
(Use the provided data in cells A6 to B19. Enter blank or zero values as 0.)
### Analysis Table: Cost Comparison (Per Unit and for 12,000 Units)
| Cost Category | Per Unit Differential Cost | 12,000 Units |
|--------------------------------------------|----------------------------|--------------|
| **Cost of purchasing** | | |
| **Direct materials** | | |
| **Direct labor** | | |
| **Variable manufacturing overhead** | | |
| **Fixed manufacturing overhead, traceable**| | |
| **Fixed manufacturing overhead, common** | | |
| **Total costs** | | |
2. Based on this analysis, determine whether Alanco should make or buy the component.
**Conclusion:**
- **Alanco should [Make/Buy] the component.**
This structured analysis helps Alanco, Inc. assess whether they should continue making the component internally or purchase from an outside supplier by comparing all relevant costs.
Transcribed Image Text:**Alanco, Inc.** manufactures a variety of products and is currently manufacturing all of its own component parts. An outside supplier has offered to sell one of those components to Alanco. The Controller has asked you to help evaluate this offer to determine if the company should make or buy the component.
Here are some tips for using Excel:
- **Cell Reference:** Allows you to refer to data from another cell in the worksheet. If you entered “=B5” into a blank cell, the formula would output the value from cell B5.
- **Basic Math Functions:** Allow you to use the basic math symbols to perform mathematical functions. You can use the following keys: + (plus sign to add), - (minus sign to subtract), * (asterisk sign to multiply), and / (forward slash to divide). For example, if you entered “=B4+B5” in a blank cell, the formula would add the values from those cells and output the result.
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
Step by step
Solved in 3 steps with 2 images
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.Recommended textbooks for you
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Horngren's Cost Accounting: A Managerial Emphasis…
Accounting
ISBN:
9780134475585
Author:
Srikant M. Datar, Madhav V. Rajan
Publisher:
PEARSON
Intermediate Accounting
Accounting
ISBN:
9781259722660
Author:
J. David Spiceland, Mark W. Nelson, Wayne M Thomas
Publisher:
McGraw-Hill Education
Financial and Managerial Accounting
Accounting
ISBN:
9781259726705
Author:
John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting Principles
Publisher:
McGraw-Hill Education