Innova uses 1,100 units of the component IMC2 every month to manufacture one of its products. The unit costsincurred to manufacture the component are as follows.Direct materialsDirect laborOverheadTotalDirectmaterialDirectlaborOverhead costs include variable material handling costs of $6.50, which are applied to products on the basis of directmaterial costs. The remainder of the overhead costs are applied on the basis of direct labor dollars and consist of60.00% variable costs and 40.00% fixed costs.A vendor has offered to supply the IMC2 component at a price of $290.00 per unit.(a)MaterialhandlingPrepare the incremental analysis for the decision to make or buy IMC2. Assume that no fixed costs will be eliminated ifproduction is outsourced. (Round answers to 2 decimal places, e.g. 12.25. Enter negative amounts usingeither a negative sign preceding the number e.g. -45 or parentheses e.g. (45).)VariableoverheadFixedoverheadPurchasepriceTotal unitcost$55.34$No39.31$126.50$221.15Make IMC2 (per unit)55.3439.316.572173.15$$Buy IMC2 (per unit)290290$$Net IncomeIncrease (Decrease)Should Innova purchase the component from the outside vendor if Innova's unused facilities remain idle?5:-11

solution a: For incremental analysis for make or buy IMC 2, we should compare relevant cost to make…

Innova uses 1,100 units of the component IMC2 every month to manufacture one of its products. The unit costs incurred to manufacture the component are as follows. Direct materials Direct labor Overhead Total $55.34 39.31 126.50 $221.15 Overhead costs include variable material handling costs of $6.50, which are applied to products on the basis of direct material costs. The remainder of the overhead costs are applied on the basis of direct labor dollars and consist of 60.00% variable costs and 40.00% fixed costs. A vendor has offered to supply the IMC2 component at a price of $290.00 per unit.

Innova uses 1,100 units of the component IMC2 every month to manufacture one of its products. The unit costs incurred to manufacture the component are as follows. Direct materials Direct labor Overhead Total $55.34 39.31 126.50 $221.15 Overhead costs include variable material handling costs of $6.50, which are applied to products on the basis of direct material costs. The remainder of the overhead costs are applied on the basis of direct labor dollars and consist of 60.00% variable costs and 40.00% fixed costs. A vendor has offered to supply the IMC2 component at a price of $290.00 per unit.

Principles of Accounting Volume 2

19th Edition

ISBN:9781947172609

Author:OpenStax

Publisher:OpenStax

Chapter5: Process Costing

Section: Chapter Questions

Problem 2PB: The following product costs are available for Kellee Company on the production of eyeglass frames:...

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