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Assume a company is considering buying 10,000 units of a component part rather than making them. A supplier has agreed to sell the company 10,000 units for a price of $40.75 per unit. The company's accounting system reports the following costs of making the part 12 ૧૦:૩૦ Direct materials Direct labor Book Variable manufacturing overhead Fixed manufacturing overhead, traceable Fixed manufacturing overhead, allocated. Total cost Per 10,000 Units Unit per Year $ 16 $ 160,000 12 120,000 2 20,000 8 80,000 4 40,000 $ 42 $420,000 One-half of the traceable fixed manufacturing overhead relates to supervisory salaries and the remainder relates to depreciation of equipment with no salvage value. If the company chooses to buy this component part from a supplier, then the supervisor who oversees its production would be discharged. What is the financial advantage (disadvantage) of buying 10,000 units from the supplier?

Assume a company is considering buying 10,000 units of a component part rather than making them. A supplier has agreed to sell the company 10,000 units for a price of $40.75 per unit. The company's accounting system reports the following costs of making the part 12 ૧૦:૩૦ Direct materials Direct labor Book Variable manufacturing overhead Fixed manufacturing overhead, traceable Fixed manufacturing overhead, allocated. Total cost Per 10,000 Units Unit per Year $ 16 $ 160,000 12 120,000 2 20,000 8 80,000 4 40,000 $ 42 $420,000 One-half of the traceable fixed manufacturing overhead relates to supervisory salaries and the remainder relates to depreciation of equipment with no salvage value. If the company chooses to buy this component part from a supplier, then the supervisor who oversees its production would be discharged. What is the financial advantage (disadvantage) of buying 10,000 units from the supplier?

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Assume a company is considering buying 10,000 units of a component part rather than making them. A supplier has agreed to sell the company 10,000 units for a price of $40.75 per unit. The company's accounting system reports the following costs of making the part 12 ૧૦:૩૦ Direct materials Direct labor Book Variable manufacturing overhead Fixed manufacturing overhead, traceable Fixed manufacturing overhead, allocated. Total cost Per 10,000 Units Unit per Year $ 16 $ 160,000 12 120,000 2 20,000 8 80,000 4 40,000 $ 42 $420,000 One-half of the traceable fixed manufacturing overhead relates to supervisory salaries and the remainder relates to depreciation of equipment with no salvage value. If the company chooses to buy this component part from a supplier, then the supervisor who oversees its production would be discharged. What is the financial advantage (disadvantage) of buying 10,000 units from the supplier?
Transcribed Image Text:Assume a company is considering buying 10,000 units of a component part rather than making them. A supplier has agreed to sell the company 10,000 units for a price of $40.75 per unit. The company's accounting system reports the following costs of making the part 12 ૧૦:૩૦ Direct materials Direct labor Book Variable manufacturing overhead Fixed manufacturing overhead, traceable Fixed manufacturing overhead, allocated. Total cost Per 10,000 Units Unit per Year $ 16 $ 160,000 12 120,000 2 20,000 8 80,000 4 40,000 $ 42 $420,000 One-half of the traceable fixed manufacturing overhead relates to supervisory salaries and the remainder relates to depreciation of equipment with no salvage value. If the company chooses to buy this component part from a supplier, then the supervisor who oversees its production would be discharged. What is the financial advantage (disadvantage) of buying 10,000 units from the supplier?
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