1. List the relevant costs of the make and buy alternatives in the table below Differential Cost to Make Alternatives Make Buy Direct materials Direct labor Variable overhead Purchase cost Total relevant cost 2. If Zion decides to buy the component from Bryce, will operating income increase or decrease, and by how much? Answer 3. Assume that 75% of Zion Manufacturing's fixed overhead for Component K2 would be eliminated if that componennt were no longer produced. If Zion decides to purchase the component from Bryce, by how much will operating income increase or decrease? which 1 Answer 4. Briefly explain how DECREASING the 75% of fixed overhead of fixed overhead for Component K2 would affect Zion's decision to make or buy the component Answer
Process Costing
Process costing is a sort of operation costing which is employed to determine the value of a product at each process or stage of producing process, applicable where goods produced from a series of continuous operations or procedure.
Job Costing
Job costing is adhesive costs of each and every job involved in the production processes. It is an accounting measure. It is a method which determines the cost of specific jobs, which are performed according to the consumer’s specifications. Job costing is possible only in businesses where the production is done as per the customer’s requirement. For example, some customers order to manufacture furniture as per their needs.
ABC Costing
Cost Accounting is a form of managerial accounting that helps the company in assessing the total variable cost so as to compute the cost of production. Cost accounting is generally used by the management so as to ensure better decision-making. In comparison to financial accounting, cost accounting has to follow a set standard ad can be used flexibly by the management as per their needs. The types of Cost Accounting include – Lean Accounting, Standard Costing, Marginal Costing and Activity Based Costing.
Use the following information to complete the excercise as follows.
Zion Manufacturing Company had always made it's componets in-house. However, Bryce Component Works had recently offered to supply one component, K2, at a price of $25 each. Zion uses 10,000 units of Component K2 each year. The cost per unit of this component is as follows.
Direct materials: $12.00
Direct labor: 8.25
Variable overhead: 4.50
Fixed overhead: 2.00
Total $26.75
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