Recher Corporation uses part Q89 in one of its products. The company's Accounting Department reports the following costs of producing the 9,100 units of the part that are needed every year. Direct materials Direct labor Variable overhead Supervisor's salary Depreciation of special equipment Allocated general overhead An outside supplier has offered to make the part and sell it to the company for $30.00 each. If this offer is accepted, the supervisc salary and all of 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 e company. If the outside supplier's offer were accepted, only $3,000 of these allocated general overhead costs would be avoided. addition, the space used to produce part Q89 could be used to make more of one of the company's other products, generating an additional segment margin of $16,700 per year for that product. Required: a. What is the financial advantage (disadvantage) of accepting the outside supplier's offer? Financial advantage (disadvantage) is b. Should the company make or buy Q89? Per Unit $9.00 $ 5.00 $9.90 $ 3.80 $3.20 $ 1.70 The company should the part
Recher Corporation uses part Q89 in one of its products. The company's Accounting Department reports the following costs of producing the 9,100 units of the part that are needed every year. Direct materials Direct labor Variable overhead Supervisor's salary Depreciation of special equipment Allocated general overhead An outside supplier has offered to make the part and sell it to the company for $30.00 each. If this offer is accepted, the supervisc salary and all of 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 e company. If the outside supplier's offer were accepted, only $3,000 of these allocated general overhead costs would be avoided. addition, the space used to produce part Q89 could be used to make more of one of the company's other products, generating an additional segment margin of $16,700 per year for that product. Required: a. What is the financial advantage (disadvantage) of accepting the outside supplier's offer? Financial advantage (disadvantage) is b. Should the company make or buy Q89? Per Unit $9.00 $ 5.00 $9.90 $ 3.80 $3.20 $ 1.70 The company should the part
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:Recher Corporation uses part Q89 in one of its products. The company's Accounting Department reports the following costs of
producing the 9,100 units of the part that are needed every year.
Direct materials
Direct labor
Variable overhead
Supervisor's salary
Depreciation of special equipment
Allocated general overhead
An outside supplier has offered to make the part and sell it to the company for $30.00 each. If this offer is accepted, the supervisor's
salary and all of 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 $3,000 of these allocated general overhead costs would be avoided. In
addition, the space used to produce part Q89 could be used to make more of one of the company's other products, generating an
additional segment margin of $16,700 per year for that product.
Required:
a. What is the financial advantage (disadvantage) of accepting the outside supplier's offer?
Financial advantage (disadvantage) is
b. Should the company make or buy Q89?
Per Unit
$9.00
$5.00
$9.90
$ 3.80
$3.20
$ 1.70
The company should
the part.
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