Assume the company could eliminate one production supervisor with a salary of $30,000 if the component is purchased from an outside supplier. Indicate if the company should make or buy the component and the total dollar difference in favor of that alternative. The management of Whalen Industries has been evaluating whether the company should continuemanufacturing a component or buy it from an outside supplier. A $100 cost per component wasdetermined as follows:Direct materialDirect labor| Variable manufacturing overheadFixed manufacturing overhead$ 15401035$100Whalen Industries uses 4,000 components per year. After Wilfert Corporation submitted a bid of $80per component, some members of management felt they could reduce costs by buying from outsideand discontinuing production of the component. If the component is obtained from Wilfert Corporation,Whalen Industries' unused production facilities could be leased to another company for $50,000 peryear.

Answer - Computation of Manufacturing cost and Buying Cost - Incremental manufacturing Cost =…

Assume the company could eliminate one production supervisor with a salary of $30,000 if the component is purchased from an outside supplier. Indicate if the company should make or buy the component and the total dollar difference in favor of that alternati

Assume the company could eliminate one production supervisor with a salary of $30,000 if the component is purchased from an outside supplier. Indicate if the company should make or buy the component and the total dollar difference in favor of that alternati

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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Question

The management of Whalen Industries has been evaluating whether the company should continue
manufacturing a component or buy it from an outside supplier. A $100 cost per component was
determined as follows:
Direct material
Direct labor
| Variable manufacturing overhead
Fixed manufacturing overhead
$ 15
40
10
35
$100
Whalen Industries uses 4,000 components per year. After Wilfert Corporation submitted a bid of $80
per component, some members of management felt they could reduce costs by buying from outside
and discontinuing production of the component. If the component is obtained from Wilfert Corporation,
Whalen Industries' unused production facilities could be leased to another company for $50,000 per
year.

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