5 Recher Corporation uses part Q89 in one of its products. The company's Accounting Department reports the following costs of producing the 8,100 units of the part that are needed every year. Direct materials Direct labor Variable overhead Supervisor's salary Depreciation of special equipment Allocated general overhead, An outside supplier has offered to make the part and sell it to the company for $23.00 each. If this offer is accepted, the supervisor's selery and all of the variable costs, including direct labor, can be avoided. The special equipment used to make the part was purchased many years ago and has no salvege value or other use. The allocated general overhead represents fixed costs of the entire company. If the outside supplier's offer were accepted, only $3,700 of these allocated general overhead costs would be avoided. In addition, the spece used to produce part G89 could be used to make more of one of the company's other products, generating an additional segment margin of $16.500 per year for that product. Required: a. What is the financial advantage (disadvantage) of accepting the outside supplier's offer? Answer is complete but not entirely correct. 13,820 ncal advantage (disadvantage) is b. Should the company make or buy 089? Answer is complete and correct. The company should Per Unit 1.6.20 13.40 $6.70 $2.50 12.10 $ 1.10 make the
5 Recher Corporation uses part Q89 in one of its products. The company's Accounting Department reports the following costs of producing the 8,100 units of the part that are needed every year. Direct materials Direct labor Variable overhead Supervisor's salary Depreciation of special equipment Allocated general overhead, An outside supplier has offered to make the part and sell it to the company for $23.00 each. If this offer is accepted, the supervisor's selery and all of the variable costs, including direct labor, can be avoided. The special equipment used to make the part was purchased many years ago and has no salvege value or other use. The allocated general overhead represents fixed costs of the entire company. If the outside supplier's offer were accepted, only $3,700 of these allocated general overhead costs would be avoided. In addition, the spece used to produce part G89 could be used to make more of one of the company's other products, generating an additional segment margin of $16.500 per year for that product. Required: a. What is the financial advantage (disadvantage) of accepting the outside supplier's offer? Answer is complete but not entirely correct. 13,820 ncal advantage (disadvantage) is b. Should the company make or buy 089? Answer is complete and correct. The company should Per Unit 1.6.20 13.40 $6.70 $2.50 12.10 $ 1.10 make the
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:LO
5
Recher Corporation uses part Q89 in one of its products. The company's Accounting Department reports the following costs of
producing the 8,100 units of the part that are needed every year.
Direct esterials
Direct labor
Variable overhead
Supervisor's salary
Depreciation of special equipment
Allocated general overhead
An outside supplier has offered to make the part and sell it to the company for $23.00 each. If this offer is accepted, the supervisor's
selery and all of the variable costs, including direct labor, can be avoided. The special equipment used to make the part was purchased
many years ago and has no salvage value or other use. The allocated general overhead represents fixed costs of the entire company.
If the outside supplier's offer were accepted, only $3,700 of these allocated general overhead costs would be avoided. In addition, the
spece used to produce part Q89 could be used to make more of one of the company's other products, generating an additional
segment margin of $16,500 per year for that product.
Required:
a. What is the financial advantage (disadvantage) of accepting the outside supplier's offer?
Answer is complete but not entirely correct.
13,820
incial advantage (disadvantage) is
b. Should the company make or buy Q89?
The company
should
Per Unit
1.6.20
$3,40
56.70
$2.50
12.10.
$ 1.10
Answer is complete and correct.
the
part
make
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