Question 1 Vandelay Industries has been manufacturing its own touch screens for its cellular phones. The company is currently operating at 100% of capacity. Variable manufacturing overhead is charged to production at the rate of 55% of direct labor cost. The direct materials and direct labor cost per unit to make the touch screens are $3.90 and $5.90, respectively. Normal production is 38.000 cellular phones per year. A supplier offers to make the touch screens at a price of $13.59 per unit. If Vandelay Industries accepts the supplier's offer, all variable manufacturing costs will be eliminated, but the $36.860 of foed manufacturing overhead currently being charged to the touch screens will remain. A) Prepare the incremental analysis for the decision to make or buy the touch screens. B) Based on the quantitative factors, would you recommend that Vandelay Industries continue to make the touch screens, or buy them from the supplier? Are there any qualitative factors to consider aside from the quantitative factors? Discuss possible advantages and disadvantages of outsourcing the production of a component.

Question 1 Vandelay Industries has been manufacturing its own touch screens for its cellular phones. The company is currently operating at 100% of capacity. Variable manufacturing overhead is charged to production at the rate of 55% of direct labor cost. The direct materials and direct labor cost per unit to make the touch screens are $3.90 and $5.90, respectively. Normal production is 38.000 cellular phones per year. A supplier offers to make the touch screens at a price of $13.59 per unit. If Vandelay Industries accepts the supplier's offer, all variable manufacturing costs will be eliminated, but the $36.860 of foed manufacturing overhead currently being charged to the touch screens will remain. A) Prepare the incremental analysis for the decision to make or buy the touch screens. B) Based on the quantitative factors, would you recommend that Vandelay Industries continue to make the touch screens, or buy them from the supplier? Are there any qualitative factors to consider aside from the quantitative factors? Discuss possible advantages and disadvantages of outsourcing the production of a component.

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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