Juanita Company must decide whether to make or buy some of its components for the appliances it produces. The costs of producing 166,000 electrical cords for its appliances are as follows: $90,000 $32,000 $20,000 $24,000 Direct materials Variable overhead Direct labor Fixed overhead Instead of making the electrical cords at an average cost per unit of $1.00 ($166,000/166,000), the company has an opportunity to buy the cords at $0.90 per unit. If the company purchases the cords, all variable costs will be eliminated. What is the total relevant cost per unit in deciding either to buy or produce the component? After considering the incremental costs and benefits, should the company continue to produce or buy the cords from the supplier?

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
icon
Related questions
Question
Juanita Company must decide whether to make or buy some of its components for the appliances it produces.
The costs of producing 166,000 electrical cords for its appliances are as follows:
$90,000
$32,000
$20,000
$24,000
Direct materials
Variable overhead
Direct labor
Fixed overhead
Instead of making the electrical cords at an average cost per unit of $1.00 ($166,000/166,000), the company has
an opportunity to buy the cords at $0.90 per unit. If the company purchases the cords, all variable costs will be
eliminated.
What is the total relevant cost per unit in deciding either to buy or produce the component?
After considering the incremental costs and benefits, should the company continue to produce or buy the
cords from the supplier?
Transcribed Image Text:Juanita Company must decide whether to make or buy some of its components for the appliances it produces. The costs of producing 166,000 electrical cords for its appliances are as follows: $90,000 $32,000 $20,000 $24,000 Direct materials Variable overhead Direct labor Fixed overhead Instead of making the electrical cords at an average cost per unit of $1.00 ($166,000/166,000), the company has an opportunity to buy the cords at $0.90 per unit. If the company purchases the cords, all variable costs will be eliminated. What is the total relevant cost per unit in deciding either to buy or produce the component? After considering the incremental costs and benefits, should the company continue to produce or buy the cords from the supplier?
Expert Solution
trending now

Trending now

This is a popular solution!

steps

Step by step

Solved in 2 steps

Blurred answer
Knowledge Booster
Relevant cost analysis
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.
Similar questions
Recommended textbooks for you
FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
Accounting
ISBN:
9781259964947
Author:
Libby
Publisher:
MCG
Accounting
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Accounting Information Systems
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Horngren's Cost Accounting: A Managerial Emphasis…
Horngren's Cost Accounting: A Managerial Emphasis…
Accounting
ISBN:
9780134475585
Author:
Srikant M. Datar, Madhav V. Rajan
Publisher:
PEARSON
Intermediate Accounting
Intermediate Accounting
Accounting
ISBN:
9781259722660
Author:
J. David Spiceland, Mark W. Nelson, Wayne M Thomas
Publisher:
McGraw-Hill Education
Financial and Managerial Accounting
Financial and Managerial Accounting
Accounting
ISBN:
9781259726705
Author:
John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting Principles
Publisher:
McGraw-Hill Education