Make-or-Buy Decision, Alternatives, Relevant Costs Each year, Basu Company produces 14,000 units of a component used in microwave ovens. An outside supplier has offered to supply the part for $1.42. The unit cost is: Direct materials $0.87 Direct labor 0.31 Variable overhead 0.12 Fixed overhead 2.55 Total unit cost $3.85 3. Which alternative is more cost effective and by how much? Making the part in house by $fill in the blank 4. What if $19,320 of fixed overhead is rental of equipment
Make-or-Buy Decision, Alternatives, Relevant Costs Each year, Basu Company produces 14,000 units of a component used in microwave ovens. An outside supplier has offered to supply the part for $1.42. The unit cost is: Direct materials $0.87 Direct labor 0.31 Variable overhead 0.12 Fixed overhead 2.55 Total unit cost $3.85 3. Which alternative is more cost effective and by how much? Making the part in house by $fill in the blank 4. What if $19,320 of fixed overhead is rental of equipment
Cornerstones of Cost Management (Cornerstones Series)
4th Edition
ISBN:9781305970663
Author:Don R. Hansen, Maryanne M. Mowen
Publisher:Don R. Hansen, Maryanne M. Mowen
Chapter3: Cost Behavior
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Problem 10E: SmokeCity, Inc., manufactures barbeque smokers. Based on past experience, SmokeCity has found that...
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Make-or-Buy Decision, Alternatives, Relevant Costs
Each year, Basu Company produces 14,000 units of a component used in microwave ovens. An outside supplier has offered to supply the part for $1.42. The unit cost is:
| Direct materials | $0.87 |
| Direct labor | 0.31 |
| Variable |
0.12 |
| Fixed overhead | 2.55 |
| Total unit cost | $3.85 |
3. Which alternative is more cost effective and by how much?
Making the part in house by $fill in the blank
4. What if $19,320 of fixed overhead is rental of equipment used only in production of the component that can be avoided if the component is purchased? Which alternative is more cost effective and by how much?
Buying the part from the external supplier by $fill in the blank
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