McGraw Company uses 7.750 units of Part X each year as a component in the assembly of one of its products. The company is presently producing Part X internally at a total cost of $135,750, computed as follows Direct materials: Direct labor Variable manufacturing overhead Fixed manufacturing overhead Total cost $ 23,250 41,000 An outside supplier has offered to provide Part X at a price of $19.10 per unit. If McGraw Company stops producing the part internally. one-third of the fixed manufacturing overhead would be eliminated. Assume that direct labor is a variable cost Outside purchase Direct materials Direct labor Variable manufacturing overhead Fixed manufacturing overhead Total cost 15,500 56,000 $ 135,750 Required: Prepare an analysis showing the annual financial advantage or disadvantage of accepting the outside supplier's offer. Make 고 Buy

McGraw Company uses 7.750 units of Part X each year as a component in the assembly of one of its products. The company is presently producing Part X internally at a total cost of $135,750, computed as follows Direct materials: Direct labor Variable manufacturing overhead Fixed manufacturing overhead Total cost $ 23,250 41,000 An outside supplier has offered to provide Part X at a price of $19.10 per unit. If McGraw Company stops producing the part internally. one-third of the fixed manufacturing overhead would be eliminated. Assume that direct labor is a variable cost Outside purchase Direct materials Direct labor Variable manufacturing overhead Fixed manufacturing overhead Total cost 15,500 56,000 $ 135,750 Required: Prepare an analysis showing the annual financial advantage or disadvantage of accepting the outside supplier's offer. Make 고 Buy

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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Sage Company is operating at 90% of capacity and is currently purchasing a part used in its manufacturing operations for $18.00 per unit. The unit cost for the business to make the part is $22.00, including fixed costs, and $9.00, not including fixed costs. If 35,306 units of the part are normally purchased during the year but could be manufactured using unused capacity, the amount of differential cost increase or decrease from making the part rather than purchasing it would be