The make or buy decision Lakeview Engine Inc. produces engines for thewatercraft industry. An outside manufacturer has offered to supply several componentparts used in the engine assemblies, which are currently being produced by Lakeview.The supplier will charge Lakeview $270 per engine for the set of parts. Lakeview'scurrent costs for those part sets are direct materials, $160; direct labor, $80; andmanufacturing overhead applied at 100% of direct labor. Variable manufacturingoverhead is considered to be 20% of the total, and fixed overhead will not change if thepart sets are acquired from the outside supplier.bd 1200Required:Should Lakeview Engine continue to make the part sets or accept the offer to purchasethem for $270?Ovin

Name: The make or buy decision Lakeview Engine Inc. produces engines for th
Uploaded: 2024-03-20T06:32:49.000Z
Channel: Bartleby
Description: The make or buy decision Lakeview Engine Inc. produces engines for thewatercraft industry. An outside manufacturer has offered to supply several componentparts used in the engine assemblies, which are currently being produced by Lakeview.The supplie

Make vs buy is a method of selecting between producing and procuring a product from an external…

Answered: rge Lakeview $270 per engine for the se…

Business

Accounting

rge Lakeview $270 per engine for the se se part sets are direct materials, $160; ad applied at 100% of direct labor. V d to be 20% of the total, and fixed overhea

Cornerstones of Cost Management (Cornerstones Series)

4th Edition

ISBN:9781305970663

Author:Don R. Hansen, Maryanne M. Mowen

Publisher:Don R. Hansen, Maryanne M. Mowen

Chapter17: Activity Resource Usage Model And Tactical Decision Making

Section: Chapter Questions

Problem 10E: Brees, Inc., a manufacturer of golf carts, has just received an offer from a supplier to provide...

See similar textbooks

Related questions

Q: Manufacturing Overhead Item Cost Variable or Fixed Cost Direct Materials Hotdog per unit $1.00…

A: Fixed Costs -These are those costs that do not change with the change in the level of inventory.…

Q: Red Raider Company uses a plantwide overhead rate with machine hours as the allocation base. Each…

A: Overhead allocation rate is used to allocate the manufacturing overheads. It can be calculated by…

Q: Compute conversion costs given the following data: direct materials, $351,100; direct labor,…

A: Conversion costs are the costs that are incurred by manufacturing companies when converting raw…

Q: Compute conversion costs given the following data: direct materials, $350,600; direct labor,…

A: Conversion cost includes those expenses which are incurred to convert raw material into finished…

Q: Per Unit Total\\nDirect materials $ 5.00 \\nDirect labor 2.00 \\nSupervision 1.90 $…

A: To determine the financial advantage or disadvantage of making the 65,000 starters instead of buying…

Q: b. Assume that management at Latex Corporation prepared the following cost estimates for the…

A: To determine whether Latex Corporation should make or buy the subassembly component, we need to…

Q: s joint products

A: Product A Product B Units of output (A) 2000 8000 Price per unit (B) $5 $2.5 Market value (C…

Q: Complete (assume $50,000 of overhead to be distributed): (Round your "Ratio"answers to the nearest…

A: Overhead refers to the costs or expenses involved in the production of goods but such costs cannot…

Q: For each of the following independent cases (A through E), compute the missing values in the table:…

A: Prime cost is the sum of direct material cost and direct labor cost. Conversion cost is the sum of…

Q: Compute conversion costs given the following data: direct materials, $394,900; direct labor,…

A: Conversion cost = Direct labor cost + Factory overhead cost

Q: Cost per Equivalent Unit The cost of direct materials transferred into the Rolling Department of…

A: Given Information: Cost of direct materials transferred into the Rolling department = $459,000…

Q: A company allocates materials handling cost to the company's two products using the below data:…

A: Solution:- Calculation of the Total Materials Handling Cost allocated to Product "B" as follows…

Q: The following information relates to Drexler Inc.’s Year 3 nancials:

Q: A company's prime costs total $3,100,000 $7,100,000. $1,050,000 and factory overhead is $5,050,000,…

A: The Conversion costs are the product cost which consist of Direct labor and the overhead…

Concept explainers

Process Costing

Process costing is a sort of operation costing which is employed to determine the value of a product at each process or stage of producing process, applicable where goods produced from a series of continuous operations or procedure. 

Job Costing

Job costing is adhesive costs of each and every job involved in the production processes. It is an accounting measure. It is a method which determines the cost of specific jobs, which are performed according to the consumer’s specifications. Job costing is possible only in businesses where the production is done as per the customer’s requirement. For example, some customers order to manufacture furniture as per their needs.

ABC Costing

Cost Accounting is a form of managerial accounting that helps the company in assessing the total variable cost so as to compute the cost of production. Cost accounting is generally used by the management so as to ensure better decision-making. In comparison to financial accounting, cost accounting has to follow a set standard ad can be used flexibly by the management as per their needs. The types of Cost Accounting include – Lean Accounting, Standard Costing, Marginal Costing and Activity Based Costing.

Topic Video

Question

The make or buy decision Lakeview Engine Inc. produces engines for the
watercraft industry. An outside manufacturer has offered to supply several component
parts used in the engine assemblies, which are currently being produced by Lakeview.
The supplier will charge Lakeview $270 per engine for the set of parts. Lakeview's
current costs for those part sets are direct materials, $160; direct labor, $80; and
manufacturing overhead applied at 100% of direct labor. Variable manufacturing
overhead is considered to be 20% of the total, and fixed overhead will not change if the
part sets are acquired from the outside supplier.
bd 1200
Required:
Should Lakeview Engine continue to make the part sets or accept the offer to purchase
them for $270?
Ovin

Expert Solution

This question has been solved!

Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.

This is a popular solution!

SEE SOLUTION Check out a sample Q&A here

Step 1: Understanding

VIEW

Step 2: Working

VIEW

Solution

VIEW

Trending now

This is a popular solution!

Step by step

Solved in 3 steps

SEE SOLUTION Check out a sample Q&A here

Knowledge Booster

Learn more about

Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.

Similar questions

Patz Company produces two types of machine parts: Part A and Part B, with unit contribution margins of 300 and 600, respectively. Assume initially that Patz can sell all that is produced of either component. Part A requires two hours of assembly, and B requires five hours of assembly. The firm has 300 assembly hours per week. Required: 1. Express the objective of maximizing the total contribution margin subject to the assembly-hour constraint. 2. Identify the optimal amount that should be produced of each machine part and the total contribution margin associated with this mix. 3. What if market conditions are such that Patz can sell at most 75 units of Part A and 60 units of Part B? Express the objective function with its associated constraints for this case and identify the optimal mix and its associated total contribution margin.
Subject: acounting
hello, help please
Troy Engines, Limited, manufactures a variety of engines for use in heavy equipment. The company has always produced all of the parts for its engines, including the carburetors. An outside supplier offered to sell one type of carburetor to Troy Engines, Limited, for a Cost of $30 per unit. To evaluate this offer, Troy Engines, Limited, summarized the cost of producing the carburetor internally as follows: Direct materials Direct labor Variable manufacturing overhead Fixed manufacturing overhead, traceable Fixed manufacturing overhead, allocated Total cost Per 13,000 Units Unit Per Year $ 13 $ 169,000 9 117,000 3 39,000 3* 6 39,000 78,000 $ 34 $ 442,000 *One-third supervisory salaries; two-thirds depreciation of special equipment (no resale value). Required: 1. If the company has no alternative use for the facilities being used to produce the carburetors, what would be the financial advantage (disadvantage) of buying 13,000 carburetors from the outside supplier? 2. Should the outside…
Troy Engines, Limited, manufactures a variety of engines for use in heavy equipment. The company has always produced all of the parts for its engines, including the carburetors. An outside supplier offered to sell one type of carburetor to Troy Engines, Limited, for a cost of $30 per unit. To evaluate this offer, Troy Engines, Limited, summarized the cost of producing the carburetor internally as follows: Direct materials Direct labor Variable manufacturing overhead Fixed manufacturing overhead, traceable Fixed manufacturing overhead, allocated Total cost Per Unit $ 12 8 2 9* Required 1 Required 2 Required 3 Required 4 12 $43 *One-third supervisory salaries; two-thirds depreciation of special equipment (no resale value). Required: 1. If the company has no alternative use for the facilities being used to produce the carburetors, what would be the financial advantage (disadvantage) of buying 12,000 carburetors from the outside supplier? 2. Should the outside supplier's offer be accepted?…
Troy Engines, Limited, manufactures a variety of engines for use in heavy equipment. The company has always produced all of the parts for its engines, including the carburetors. An outside supplier offered to sell one type of carburetor to Troy Engines, Limited, for a cost of $30 per unit. To evaluate this offer, Troy Engines, Limited, summarized the cost of producing the carburetor internally as follows: Direct materials Direct labor Variable manufacturing overhead Fixed manufacturing overhead, traceable Fixed manufacturing overhead, allocated Total cost Per 19,000 Units Unit Per Year $ 12 $ 228,000 10 3 190,000 57,000 3* 6 57,000 114,000 $ 34 $ 646,000 "One-third supervisory salaries; two-thirds depreciation of special equipment (no resale value). Required: 1. If the company has no alternative use for the facilities being used to produce the carburetors, what would be the financial advantage (disadvantage) of buying 19,000 carburetors from the outside supplier? 2. Should the outside…
Troy Engines, Limited, manufactures a variety of engines for use in heavy equipment. The company has always produced all of the parts for its engines, including the carburetors. An outside supplier offered to sell one type of carburetor to Troy Engines, Limited, for a cost of $40 per unit. To evaluate this offer, Troy Engines, Limited, summarized the cost of producing the carburetor internally as follows: Direct materials Direct labor Variable manufacturing overhead Fixed manufacturing overhead, traceable Fixed manufacturing overhead, allocated Total cost Per Unit 15,000 Units Per Year $ 15 11 2 9* 12 $ 225,000 165,000 30,000 135,000 180,000 $ 49 $ 735,000 *One-third supervisory salaries; two-thirds depreciation of special equipment (no resale value). Required: 1. If the company has no alternative use for the facilities being used to produce the carburetors, what would be the financial advantage (disadvantage) of buying 15,000 carburetors from the outside supplier? 2. Should the…
ces Kando Company currently pays $13 per unit to buy a part for a product it manufactures. Instead, Kando could make the part forper unit costs of $6 for direct materials, $4 for direct labor, and $2 for incremental overhead. Kando normally applies overhead costs using a predetermined rate of 200% of direct labor cost. (a) Prepare a make or buy analysis of costs for this part. (b) Should Kando make or buy the part? Direct materials Direct labor Overhead Cost to buy Cost per unit Company should: Make Make Buy
Ragemark Company produces 15,000 units of a component used in freezer. An outside supplier has offered to supply the part for $1.42. The unit cost is: Direct material $0.55 Direct labour 0.2 Variable overhead 0.1 Fixed overhead 2.45 Total unit cost $3.30 Required: 1. What are the alternatives for Ragemark Company? 2. Assume that none of the ﬁxed cost is avoidable. List the relevant cost(s) of internal production and of external purchase. 3. Which alternative is more cost effective and by how much?
James Company makes flanges for its main product of widgets. The cost of making each widget is as follows: Another company has offered to sell to James Company the flanges for a price of $19.00 each. Should James Company buy the flanges from the other company or continue to make the flanges themselves? Show your computations.
The following production costs are provided for AudioPro Company, a manufacturer of high-quality headphones. Manufacturing Costs: Direct Materials Direct Labor Variable Overhead Fixed Overhead Total It has been determined that the headphones could be purchased from Integrated Labs at a cost of $135 plus $8 shipping costs. Assume 40% of fixed overhead allocated to making headphones relates to a production manager who would not be retained if the headphones were not produced by AudioPro. Required: a. Considering the offer from Integrated Labs, show whether AudioPro should make or buy the product. b. How would your analysis change if AudioPro could use capacity resources for alternative activities that would produce a contribution of $35 per unit? $ 60 38 22 50 $ 170 Complete this question by entering your answers in the tabs below. Required A Required B How would your analysis change if AudioPro could use capacity resources for alternative activities that would produce a contribution of…
The following production costs are provided for AudioPro Company, a manufacturer of high-quality headphones. Manufacturing Costs: Direct Materials Direct Labor Variable Overhead Fixed Overhead Total It has been determined that the headphones could be purchased from Integrated Labs at a cost of $135 plus $8 shipping costs. Assume 40% of fixed overhead allocated to making headphones relates to a production manager who would not be retained if the headphones were not produced by AudioPro. Required: a. Considering the offer from Integrated Labs, show whether AudioPro should make or buy the product. b. How would your analysis change if AudioPro could use capacity resources for alternative activities that would produce a contribution of $35 per unit? Complete this question by entering your answers in the tabs below. Required A Required B Considering the offer from Integrated Labs, show whether AudioPro should make or buy the product. Purchase Cost Headphones Shipping Cost Manufacturing Cost:…