Need help with a practice question from the last unit The image is from an educational scenario discussing a decision-making problem in managerial accounting.### Text Transcription:**Part U67** is used in one of Broce Corporation's products. The company's Accounting Department reports the following costs of producing the 14,800 units of the part that are needed every year:- **Direct materials**: $8.10 per unit- **Direct labor**: $7.00 per unit- **Variable overhead**: $2.50 per unit- **Supervisors’ salaries**: $4.80 per unit- **Depreciation of special equipment**: $5.90 per unit- **Allocated general overhead**: $6.00 per unitAn outside supplier has offered to make the part and sell it to the company for $21.00 each. If this offer is accepted, the supervisor's salary and all the variable costs, including direct labor, can be avoided. The special equipment used to make the part was purchased many years ago and has no salvage value or other use. The allocated general overhead represents fixed costs of the entire company. If the outside supplier's offer were accepted, only $20,800 of these allocated general overhead costs would be avoided.**Required:**1. Prepare a report that shows the financial impact of buying part U67 from the supplier rather than continuing to make it inside the company.2. Which alternative should the company choose?**Complete this question by entering your answers in the tabs below.****Required 1: Required 2:****2. Which alternative should the company choose?**Options:- Purchase the part- Make the part### Description of Graphical Elements:There are no graphs or diagrams in this image. The content is primarily textual, presenting a cost comparison scenario for decision-making purposes.

The decision making shall be made on the basis of the cost that is being incurred in both the alternatives. The main focus is on variable cost that are different in both the cases or else the total cost of both alternatives can be compared and analysis can be done as in which alternative cost is lower.Calculation of total cost while making the part U67. Calculation of total cost per unit. Direct material $1.7 Direct labor $2.7 Variable overheads $5.5 Supervisor's salary $6.0 Depreciation of special equipment $7.1 Allocated general overhead $4.2 Total cost per unit $27.2 Number of units 14,800 Total cost (14,800 * $27.2) $402,560 Calculation of total cost while buying the part U67 Purchase cost (14,800*$21.0) $310,800 Depreciation (14,800 * $7.1) $105,080 General overheads[(14800*$4.2)-$20,800] $ 41,360 Total cost $457,240 Since the equipment does not have any other use, hence depreciation of the same shall be charged to part U67 only. Therefore, company shall make the units itself rather than buying the same from outside. The total cost of "make" alternative is less by $54,680. Therefore, company shall make the product.

Business

Accounting

Part U67 s used in one of Broce Corporation's products. The companys Accounting Department reports the folwing costs of producing the 14800 unts of the part that are needed every year Direct aterlals Unit Drect lo vertead e's salary $2.70 $5. Depreciation pclal ient $7. $4.20 Allocate geeral overteal An outsde uppler has offered to make the part and sell t to the company for $21.00 ch his offers accepted the supersors saary and al of the varable costs, incuding drect labor, can be avoided The specalecuomert used to make the part was purchased many years ago and has no salvage value or other use The slocated genera overhead represants fed costs of me ertre compeny hé uide uppiters offer were sccepned, only $20.800 of these alocated genera overhead costs would be evoided Reqred a Prepare a reoort that shows the firancial impect of buyng cert U67 from the Suopler rether than cortinuing to maetinside e company Which anamative should the company choose

Part U67 s used in one of Broce Corporation's products. The companys Accounting Department reports the folwing costs of producing the 14800 unts of the part that are needed every year Direct aterlals Unit Drect lo vertead e's salary $2.70 $5. Depreciation pclal ient $7. $4.20 Allocate geeral overteal An outsde uppler has offered to make the part and sell t to the company for $21.00 ch his offers accepted the supersors saary and al of the varable costs, incuding drect labor, can be avoided The specalecuomert used to make the part was purchased many years ago and has no salvage value or other use The slocated genera overhead represants fed costs of me ertre compeny hé uide uppiters offer were sccepned, only $20.800 of these alocated genera overhead costs would be evoided Reqred a Prepare a reoort that shows the firancial impect of buyng cert U67 from the Suopler rether than cortinuing to maetinside e company Which anamative should the company choose

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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