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: Direct Materials Direct Labor Variable Overhead Fixed Overhead $ 60 38 22 50 $ 170 Advantage to buy AudioPro Company Offer from Integrated Labs Avoidable cost to make S $ S 60 60 38 30 Cost to buy $ 188 188 143 135 8 143 4

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: Direct Materials Direct Labor Variable Overhead Fixed Overhead $ 60 38 22 50 $ 170 Advantage to buy AudioPro Company Offer from Integrated Labs Avoidable cost to make S $ S 60 60 38 30 Cost to buy $ 188 188 143 135 8 143 4

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Description: The following production costs are provided for AudioPro Company, a manufacturer of high-quality headphones.Manufacturing Costs:Direct MaterialsDirect LaborVariable OverheadFixed OverheadTotalIt has been determined that the headphones could be purch

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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