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b. Assume that management at Latex Corporation prepared the following cost estimates for the manufacture of a subassembly component based on an annual production of 8000 units: Direct materials Direct labour Variable labour Fixed overhead applied (150% direct labour cost) Total Per Unit $ 10 8 8 12 38 Total $80,000 64,000 64,000 96,000 304,000 The supplier has offered the subassembly at a price of $32 each. Two thirds of fixed factory overhead, which represents executive salaries, rent, depreciation, and taxes, continue regardless of the decision. Question As the Management Accountant at this company advise management whether the company should buy or make the product. Give two (2) reasons to support your decision. Answer with calculation

b. Assume that management at Latex Corporation prepared the following cost estimates for the manufacture of a subassembly component based on an annual production of 8000 units: Direct materials Direct labour Variable labour Fixed overhead applied (150% direct labour cost) Total Per Unit $ 10 8 8 12 38 Total $80,000 64,000 64,000 96,000 304,000 The supplier has offered the subassembly at a price of $32 each. Two thirds of fixed factory overhead, which represents executive salaries, rent, depreciation, and taxes, continue regardless of the decision. Question As the Management Accountant at this company advise management whether the company should buy or make the product. Give two (2) reasons to support your decision. Answer with calculation

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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b. Assume that management at Latex Corporation prepared the following cost estimates for the manufacture of a subassembly component based on an annual production of 8000 units: Direct materials Direct labour Variable labour Fixed overhead applied (150% direct labour cost) Total Per Unit $ 10 8 8 12 38 Total $80,000 64,000 64,000 96,000 304.000 The supplier has offered the subassembly at a price of $32 each. Two thirds of fixed factory overhead, which represents executive salaries, rent, depreciation, and taxes, continue regardless of the decision. Question As the Management Accountant at this company advise management whether the company should buy or make the product. Give two (2) reasons to support your decision. Answer with calculation
Transcribed Image Text:b. Assume that management at Latex Corporation prepared the following cost estimates for the manufacture of a subassembly component based on an annual production of 8000 units: Direct materials Direct labour Variable labour Fixed overhead applied (150% direct labour cost) Total Per Unit $ 10 8 8 12 38 Total $80,000 64,000 64,000 96,000 304.000 The supplier has offered the subassembly at a price of $32 each. Two thirds of fixed factory overhead, which represents executive salaries, rent, depreciation, and taxes, continue regardless of the decision. Question As the Management Accountant at this company advise management whether the company should buy or make the product. Give two (2) reasons to support your decision. Answer with calculation
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