1. What are the alternatives facing Zion Manufacturing with respect to List the relevant costs for each alternative. If required, round your answers to the nearest cent. Total Relevant Cost Make $ per unit Buy $ per unit Differential Cost to Make $ per unit If Zion decides to purchase the component from Bryce, by how much will operating income increase or decrease? $ 3. Conceptual Connection: Which alternative is better?
1. What are the alternatives facing Zion Manufacturing with respect to List the relevant costs for each alternative. If required, round your answers to the nearest cent. Total Relevant Cost Make $ per unit Buy $ per unit Differential Cost to Make $ per unit If Zion decides to purchase the component from Bryce, by how much will operating income increase or decrease? $ 3. Conceptual Connection: Which alternative is better?
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Question
Zion Manufacturing had always made its components in-house. However, Bryce Component Works had recently offered to supply one component, K2, at a price of $11 each. Zion uses 4,900 units of Component K2 each year. The cost per unit of this component is as follows:
| Direct materials | $7.23 |
| Direct labor | 2.14 |
| Variable |
1.29 |
| Fixed overhead | 4.00 |
| Total | $14.66 |
1. What are the alternatives facing Zion Manufacturing with respect to
List the relevant costs for each alternative. If required, round your answers to the nearest cent.
| Total Relevant Cost | |
| Make | $ per unit |
| Buy | $ per unit |
| Differential Cost to Make | $ per unit |
If Zion decides to purchase the component from Bryce, by how much will operating income increase or decrease?
$
3. Conceptual Connection: Which alternative is better?
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