Problem - Make or BuyXander Construction uses 1,000 units of Part No. SH314each month in the production of large constructionequipment. The cost to manufacture one unit of SH314 ispresented as follows:Direct MaterialsMaterials handling (10% of materials cost)Direct laborManufacturing overhead (150% of direct labor dotal Manufacturing Cost$20020180270$670Materials handling, which is not included in manufacturingoverhead, represents the direct variable costs of thereceiving department that are applied to direct materialsand purchased components on the basis of their cost.Xander's annual manufacturing overhead budget is one-third variable and two-thirds fixed. Anya Castings, one ofXander's reliable vendors, has offered to supply SH314 ata unit price of $5001. If Xander Construction purchases the 1,000 SH314units from Anya Castings, the capacity Xander used tomanufacture these parts would be idle. Should Xandermake or buy the component? What is the cost differenceper unit to buy the part?2. Assume Xander Construction is able to rent all idlecapacity for $80,000 per month. If Xander decides topurchase the 1,000 units from Anya Castings, what isXander's change in monthly cost for SH314?3. Assume the rental opportunity does not exist. What isthe minimum price Xander Construction would be willing topay Anya Castings if Xander requires a $10,000 savings amonth before buvina from an outside vendor?

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Problem - Make or Buy Xander Construction uses 1,000 units of Part No. SH314 each month in the production of large construction equipment. The cost to manufacture one unit of SH314 is presented as follows:

Problem - Make or Buy Xander Construction uses 1,000 units of Part No. SH314 each month in the production of large construction equipment. The cost to manufacture one unit of SH314 is presented as follows:

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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