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Make-or-Buy Decision Arches Manufacturing had always made its components in-house. However, Canyonlands Component Works had recently offered to supply one component, DA, at of $12 each. Arches uses 4,700 units of component DA each year. The cost per unit of this component is as follows: $7.30 Direct materials Direct labor Variable overhead Fixed overhead 2.65 Make 1.51 4.00 Total The fixed overhead is an allocated expense; none of it would be eliminated if production of component DA stopped. Required: 1. What are the alternatives facing Arches Manufacturing with respect to production of component DA? Buy $15.46 2. Ust the relevant costs for each alternative. If required, round your answers to the nearest cent. Total Relevant Cost per unit per unit Differential Cost to Make per unit If Arches decides to purchase the component from Canyonlands, by how much will operating income increase or decrease (as compared to making the compone house)?

Make-or-Buy Decision Arches Manufacturing had always made its components in-house. However, Canyonlands Component Works had recently offered to supply one component, DA, at of $12 each. Arches uses 4,700 units of component DA each year. The cost per unit of this component is as follows: $7.30 Direct materials Direct labor Variable overhead Fixed overhead 2.65 Make 1.51 4.00 Total The fixed overhead is an allocated expense; none of it would be eliminated if production of component DA stopped. Required: 1. What are the alternatives facing Arches Manufacturing with respect to production of component DA? Buy $15.46 2. Ust the relevant costs for each alternative. If required, round your answers to the nearest cent. Total Relevant Cost per unit per unit Differential Cost to Make per unit If Arches decides to purchase the component from Canyonlands, by how much will operating income increase or decrease (as compared to making the compone house)?

FINANCIAL ACCOUNTING
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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1. What are the alternatives facing Arches Manufacturing with respect to production of component DA? 2. List the relevant costs for each alternative. If required, round your answers to the nearest cent. Total Relevant Cost per unit per unit Make "Buy Differential Cost to Make per unit If Arches decides to purchase the component from Canyonlands, by how much will operating income increase or decrease (as compared to making the component in- house)? 3. Conceptual Connection: Which alternative is better?
Transcribed Image Text:1. What are the alternatives facing Arches Manufacturing with respect to production of component DA? 2. List the relevant costs for each alternative. If required, round your answers to the nearest cent. Total Relevant Cost per unit per unit Make "Buy Differential Cost to Make per unit If Arches decides to purchase the component from Canyonlands, by how much will operating income increase or decrease (as compared to making the component in- house)? 3. Conceptual Connection: Which alternative is better?
Make-or-Buy Decision Arches Manufacturing had always made its components in-house. However, Canyonlands Component Works had recently offered to supply one component, DA, at a of $12 each. Arches uses 4,700 units of component DA each year. The cost per unit of this component is as follows: Direct materials Direct labor Variable overhead Fixed overhead Total $15.46 The fixed overhead is an allocated expense; none of it would be eliminated if production of component DA stopped. $7.30 2.65 1.51 4.00 Required: 1. What are the alternatives facing Arches Manufacturing with respect to production of component DA? Make 2. Ust the relevant costs for each alternative. If required, round your answers to the nearest cent. Total Relevant Cost per unit per unit Buy Differential Cost to Make per unit If Arches decides to purchase the component from Canyonlands, by how much will operating income increase or decrease (as compared to making the compone house)? Connection which alternative is better?
Transcribed Image Text:Make-or-Buy Decision Arches Manufacturing had always made its components in-house. However, Canyonlands Component Works had recently offered to supply one component, DA, at a of $12 each. Arches uses 4,700 units of component DA each year. The cost per unit of this component is as follows: Direct materials Direct labor Variable overhead Fixed overhead Total $15.46 The fixed overhead is an allocated expense; none of it would be eliminated if production of component DA stopped. $7.30 2.65 1.51 4.00 Required: 1. What are the alternatives facing Arches Manufacturing with respect to production of component DA? Make 2. Ust the relevant costs for each alternative. If required, round your answers to the nearest cent. Total Relevant Cost per unit per unit Buy Differential Cost to Make per unit If Arches decides to purchase the component from Canyonlands, by how much will operating income increase or decrease (as compared to making the compone house)? Connection which alternative is better?
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