Q. 8 Which following costs need to be considered for both make or buy options?O. Fixed overheadO. Variable overheadO. Rental revenue Q. 9 What is the per unit cost to purchase from the vendor? Round to the nearest penny.Q. 10 Based on your analysis, the CreativeStationary Co. should make the product in-house or buy them from the vender?O. MakeO. Buy Do (Q8,9,10 plz) CreativeStationary Co., a stationary company, currently produces 15,000 units of fountain pen peryear. It is anticipated that their fountain pen production will last for the next three years.• CreativeStationary Co. can continue to make the fountain pen on their own. The annual costsare shown in the table below.ItemExpenseDirect materials$20,000Direct labor$100,000Variables overhead (power)$150,000Fixed overhead (light and heat) $90,00If Creative Stationary Co. plans to produce the product in-house, annual direct material costs andthe fixed overhead will remain at its current level over the next three years. However, the directlabor will increase by $5,000 per year, and variable overhead costs will increase at the rate of 2%.• Instead of making the pen by themselves, a vendor has offered to sell CreativeStationary Co.units of fountain pens for $25 per unit. If CreativeStationary Co. choose to purchase fromvendor, some of the manufacturing facilities currently used to manufacture the fountain pencould be rented to a third party for $25,500 per year.The MARR is 4%.

“Since you have asked multiple questions, we will solve the first question for you. If you want any…

Answered: Q. 8 Which following costs need to be…

Q. 8 Which following costs need to be considered for both make or buy options? O. Fixed overhead O. Variable overhead O. Rental revenue

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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Question

Q. 8 Which following costs need to be considered for both make or buy options?

O. Fixed overhead

O. Variable overhead

O. Rental revenue

Q. 9 What is the per unit cost to purchase from the vendor? Round to the nearest penny.

Q. 10 Based on your analysis, the CreativeStationary Co. should make the product in-house or buy them from the vender?

O. Make

O. Buy Do

(Q8,9,10 plz)

CreativeStationary Co., a stationary company, currently produces 15,000 units of fountain pen per
year. It is anticipated that their fountain pen production will last for the next three years.
• CreativeStationary Co. can continue to make the fountain pen on their own. The annual costs
are shown in the table below.
Item
Expense
Direct materials
$20,000
Direct labor
$100,000
Variables overhead (power)
$150,000
Fixed overhead (light and heat) $90,00
If Creative Stationary Co. plans to produce the product in-house, annual direct material costs and
the fixed overhead will remain at its current level over the next three years. However, the direct
labor will increase by $5,000 per year, and variable overhead costs will increase at the rate of 2%.
• Instead of making the pen by themselves, a vendor has offered to sell CreativeStationary Co.
units of fountain pens for $25 per unit. If CreativeStationary Co. choose to purchase from
vendor, some of the manufacturing facilities currently used to manufacture the fountain pen
could be rented to a third party for $25,500 per year.
The MARR is 4%.

Definition Definition Indirect costs incurred while producing goods or services. Overhead costs cannot be directly attributed to products or services. Overhead includes indirect material cost, indirect labor cost, rent, utilities expenses, and depreciation. Since these costs directly affect the profitability of a company, managing overhead becomes an important task for management.

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