Ivanhoe Firm is considering whether to outsource the manufacture of subcomponent JXY. The accounting department provides the following cost information for manufacturing 11,600 units of subcomponent JXY per month. Direct materials costs $39,000 Direct labour costs 31,100 Variable overhead 15,000 Fixed overhead* 13,100 *Fixed overhead includes $4,100 supervisor's salary. International Firm agrees to supply Ivanhoe with 11,600 units per month for a total cost of $132,750. If subcomponent JXY is outsourced, Ivanhoe will be able to increase the production and sales of its final product by 1,050 units per month; the product is sold for $105 per unit and its average variable costs per unit are $70. The supervisor's salary will be eliminated if subcomponent JXY is outsourced. Prepare an incremental analysis for subcomponent JXY. Make 3 C $ Buy $ Incremental Costs (Savings)
Ivanhoe Firm is considering whether to outsource the manufacture of subcomponent JXY. The accounting department provides the following cost information for manufacturing 11,600 units of subcomponent JXY per month. Direct materials costs $39,000 Direct labour costs 31,100 Variable overhead 15,000 Fixed overhead* 13,100 *Fixed overhead includes $4,100 supervisor's salary. International Firm agrees to supply Ivanhoe with 11,600 units per month for a total cost of $132,750. If subcomponent JXY is outsourced, Ivanhoe will be able to increase the production and sales of its final product by 1,050 units per month; the product is sold for $105 per unit and its average variable costs per unit are $70. The supervisor's salary will be eliminated if subcomponent JXY is outsourced. Prepare an incremental analysis for subcomponent JXY. Make 3 C $ Buy $ Incremental Costs (Savings)
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:Ivanhoe Firm is considering whether to outsource the manufacture of subcomponent JXY. The accounting department
provides the following cost information for manufacturing 11,600 units of subcomponent JXY per month.
Direct materials costs
$39,000
Direct labour costs
31,100
Variable overhead
15,000
Fixed overhead*
13,100
*Fixed overhead includes $4,100 supervisor's salary.
International Firm agrees to supply Ivanhoe with 11,600 units per month for a total cost of $132,750. If subcomponent JXY
is outsourced, Ivanhoe will be able to increase the production and sales of its final product by 1,050 units per month; the
product is sold for $105 per unit and its average variable costs per unit are $70. The supervisor's salary will be eliminated if
subcomponent JXY is outsourced.
Prepare an incremental analysis for subcomponent JXY.
Make
S
C
$
Buy
$
Incremental
Costs
(Savings)
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