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

Principles of Accounting Volume 2

19th Edition

ISBN:9781947172609

Author:OpenStax

Publisher:OpenStax

Chapter5: Process Costing

Section: Chapter Questions

Problem 2PB: The following product costs are available for Kellee Company on the production of eyeglass frames:...

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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 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
S
8888
60
60
38
30
Cost to buy
$
188
188 143
135
8
143
☆

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