Yankee Manufacturing currently buys a component from a supplier for $14.50 per unit but is considering making the component itself next year. This year, the company purchased 3,500 units, and next year, they estimate they will need 3,800 units. The estimated costs to make the component are as follows: Cost Component Direct materials Per Unit Total Cost (for 3,800 units) $2.80 $10,640 Direct labor 5.20 $19,760 Variable overhead 4.50 $17,100 Fixed overhead 5.80 $22,040 $18.30 $69,540 Total Of the estimated fixed overhead, $9,000 are common costs that would be allocated to the part; the rest would be additional fixed overhead costs. If Yankee Manufacturing continues to buy the part instead of making it, how much will it save?

Yankee Manufacturing currently buys a component from a supplier for $14.50 per unit but is considering making the component itself next year. This year, the company purchased 3,500 units, and next year, they estimate they will need 3,800 units. The estimated costs to make the component are as follows: Cost Component Direct materials Per Unit Total Cost (for 3,800 units) $2.80 $10,640 Direct labor 5.20 $19,760 Variable overhead 4.50 $17,100 Fixed overhead 5.80 $22,040 $18.30 $69,540 Total Of the estimated fixed overhead, $9,000 are common costs that would be allocated to the part; the rest would be additional fixed overhead costs. If Yankee Manufacturing continues to buy the part instead of making it, how much will it save?

Principles of Accounting Volume 2

19th Edition

ISBN:9781947172609

Author:OpenStax

Publisher:OpenStax

Chapter6: Activity-based, Variable, And Absorption Costing

Section: Chapter Questions

Problem 1PA: Colonels uses a traditional cost system and estimates next years overhead will be $480,000, with the...

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