MCQ MegaTech Solutions is currently buying 70,000 circuit boardsfrom BoardMakers Inc. at a price of $72 per board. MegaTech isconsidering manufacturing its own circuit boards. The costs toproduce the circuit boards are as follows:•Direct materials: $34 per unitDirect labor: $14 per unit.Variable factory overhead: $19unitper•Fixed costs for the plant would increase by: $110,000Which option should be selected and why?a. Make, $240,000 increase in profitsb. Buy, $110,000 more in profitsc. Make, $532,000 increase in profitsd. Buy, $441,000 more in profits

Explanation of Make or Buy Decision: This is a strategic choice that companies face when deciding…

Answered: MegaTech Solutions is currently buying…

Principles of Accounting Volume 2

19th Edition

ISBN:9781947172609

Author:OpenStax

Publisher:OpenStax

Chapter10: Short-term Decision Making

Section: Chapter Questions

Problem 4EB: Dimitri Designs has capacity to produce 30,000 desk chairs per year and is currently selling all...

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Aril Industries is a multiproduct company that currently manufactures 30,000 units of Part 730 each month for use in production. The facilities now being used to produce Part 730 have fixed monthly overhead costs of 150,000 and a theoretical capacity to produce 60,000 units per month. If Aril were to buy Part 730 from an outside supplier, the facilities would be idle, and 40% of fixed costs would continue to be incurred. There are no alternative uses for the facilities. The variable production costs of Part 730 are 11 per unit. Fixed overhead is allocated based on planned production levels. If Aril Industries continues to use 30,000 units of Part 730 each month, it would realize a net benefit by purchasing Part 730 from an outside supplier only if the suppliers unit price is less than: a. 12.00. b. 12.50. c. 13.00. d. 14.00.
Oat Treats manufactures various types of cereal bars featuring oats. Simmons Cereal Company has approached Oat Treats with a proposal to sell the company its top selling oat cereal bar at a price of $27,500 for 20,000 bars. The costs shown are associated with production of 20,000 oat bars currently. The manufacturing overhead consists of $3,000 of variable costs with the balance being allocated to fixed costs. Should Oat Treats make or buy the oat bars?
Mighty Safe Fire Alarm is currently buying 61,000 motherboards from MotherBoard, Inc. at a price of $63 per board. Mighty Safe is considering making its own motherboards. The costs to make the motherboards are as follows: direct materials, $34 per unit; direct labor, $11 per unit; and variable factory overhead, $14 per unit. Fixed costs for the plant would increase by $80,000. Which option should be selected and why? a.make, $244,000 increase in profits b.buy, $164,090 more in profits c.buy, $80,000 more in profits d.make, $164,090 increase in profits
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InteliSystems needs 79,000 optical switches next year . By outsourcing them, InteliSystems can use its idle facilities to manufacture another product that will contribute $140,000 to operating income, but none of the fixed costs will be avoidable. Should InteliSystems make or buy the switches? Show your analysis based on the information in the table below for making 70,000 switches.
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Mighty Safe Fire Alarm is currently buying 57,000 motherboards from MotherBoard, Inc. at a price of $65 per board. Mighty Safe is considering making its own motherboards. The costs to make the motherboards are as follows: direct materials, $28 per unit; direct labor, $10 per unit; and variable factory overhead, $16 per unit. Fixed costs for the plant would increase by $80,000. Which option should be selected and why?
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Mighty Safe Fire Alarm is currently buying 55,000 motherboards from MotherBoard, Inc., at a price of $67 per board. Mighty Safe is considering making its own boards: The costs to make the board are as follows: direct materials, $34 per unit; direct labor, $11 per unit; and variable factory overhead, $16 per unit. Fixed costs for the plant would increase by $86,000. Which option should be selected and why? a. buy, $244,200 increase in profits O b. buy, $86,000 increase in profits Oc. make, $244,200 increase in profits Od. make, $330,000 increase in profits
Mighty Safe Fire Alarm is currently buying 57,000 motherboards from MotherBoard, Inc., at a price of $66 per board. Mighty Safe is considering making its own boards. The costs to make the board are as follows: direct materials, $29 per unit; direct labor, $8 per unit; and variable factory overhead, $16 per unit. Fixed costs for the plant would increase by $87,000. Which option should be selected and why? a. make, $653,790 increase in profits b. make, $741,000 increase in profits c. buy, $653,790 increase in profits d. buy, $87,000 increase in profits
Mighty Safe Fire Alarm is currently buying 60,000 motherboards from MotherBoard, Inc., at a price of $63 per board. Mighty Safe is considering making its own boards. The costs to make the board are as follows: direct materials, $33 per unit; direct labor, $9 per unit; and variable factory overhead, $17 per unit. Fixed costs for the plant would increase by $70,000. Which option should be selected and why?
Vista Company manufactures electronic equipment. It currently purchases the special switches used in each of its products from an outside supplier. The supplier charges Vista $1.45 per switch. Vista’s CEO is considering purchasing either machine A or machine B so the company can manufacture its own switches. The projected data are as follows: Machine A Machine B Annual fixed costs $ 108,900 $ 145,000 Variable cost per switch 0.46 0.20 Required: 1. For each machine, what is the minimum number of switches that Vista must make annually for total costs to equal outside purchase cost? 2. What volume level would produce the same total costs regardless of the machine purchased? 3. What is the most profitable alternative for producing 150,000 switches per year and what is the total cost of that alternative?

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