Black Eagle Co needs 20,000 units of Part MZ to use in producing one of its products. If Black Eagle buys the Part MZ from Gomedov Co for $79 instead of making it, Black Eagle will not use the released facilities in another manufacturing activity. Twenty percent of the fixed overhead will continue irrespective of CEO Norman Wesley’s decision.Table AttachedRequiredExplain which alternative is more attractive to Black Eagle, make or buy Part MZAssume there is new information that Black Eagle is negotiating to purchase cheaper raw materials from supplier (20% lower price). Is this information relevant or irrelevant? (On the basis of financial considerations alone, should Black Eagle make or buy Part MZ? Show your calculationsWhat are relevant qualitative factors that Black Eagle should consider to decide whether to make or buy Part MZ? (at least one factor for each decision [Make or Buy) The cost per unit data are as follows:Cost to make the part($)Direct Materials30Direct Labor15Variable Overhead20Fixed Overhead2085

Variable cost means the cost which vary with the level of output where as fixed cost remain fixed…

Answered: Black Eagle Co needs 20,000 units of…

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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Black Eagle Co needs 20,000 units of Part MZ to use in producing one of its products. If Black Eagle buys the Part MZ from Gomedov Co for $79 instead of making it, Black Eagle will not use the released facilities in another manufacturing activity. Twenty percent of the fixed overhead will continue irrespective of CEO Norman Wesley’s decision.

Table Attached

Required

Explain which alternative is more attractive to Black Eagle, make or buy Part MZ
Assume there is new information that Black Eagle is negotiating to purchase cheaper raw materials from supplier (20% lower price). Is this information relevant or irrelevant? (On the basis of financial considerations alone, should Black Eagle make or buy Part MZ? Show your calculations
What are relevant qualitative factors that Black Eagle should consider to decide whether to make or buy Part MZ? (at least one factor for each decision [Make or Buy)

The cost per unit data are as follows:
Cost to make the part
($)
Direct Materials
30
Direct Labor
15
Variable Overhead
20
Fixed Overhead
20
85

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