Yardwork Tools Corp manufactures garden tools in a factory in Taneytown, Maryland. Recently, the company designed a collection of tools for professional use rather than consumer use. Management needs to make a good decision about whether to produce this line in their existing space in Maryland, where space is available or to accept an offer from a manufacturer in Taiwan. Data concerning the decision are as follows: Expected annual sales of tools (in units) 660,000 Average selling price of tools $11 Price quoted by Taiwanese company, in New Taiwanese Dollars (NTD) 27,300 Current exchange rate 9,100 NTD = $1 Variable manufacturing costs $2.85 per unit Incremental annual fixed manufacturing costs associated with the new product line $310,000 Variable selling and distribution costsª $0.50 per unit Annual fixed selling and distribution costsª $250,000 ªSelling and distribution costs are the same regardless of whether the tools are manufactured in Maryland or Requirement 1. Should Yardwork Tools Corp manufacture the 660,000 garden tools in the Maryland facility or purchase them from the supplier in Taiwan? Explain. The cost of manufacturing 660,000 garden tools in the Maryland facility is and the cost of purchasing 660,000 garden tools from the Taiwan supplier is .
Yardwork Tools Corp manufactures garden tools in a factory in Taneytown, Maryland. Recently, the company designed a collection of tools for professional use rather than consumer use. Management needs to make a good decision about whether to produce this line in their existing space in Maryland, where space is available or to accept an offer from a manufacturer in Taiwan. Data concerning the decision are as follows: Expected annual sales of tools (in units) 660,000 Average selling price of tools $11 Price quoted by Taiwanese company, in New Taiwanese Dollars (NTD) 27,300 Current exchange rate 9,100 NTD = $1 Variable manufacturing costs $2.85 per unit Incremental annual fixed manufacturing costs associated with the new product line $310,000 Variable selling and distribution costsª $0.50 per unit Annual fixed selling and distribution costsª $250,000 ªSelling and distribution costs are the same regardless of whether the tools are manufactured in Maryland or Requirement 1. Should Yardwork Tools Corp manufacture the 660,000 garden tools in the Maryland facility or purchase them from the supplier in Taiwan? Explain. The cost of manufacturing 660,000 garden tools in the Maryland facility is and the cost of purchasing 660,000 garden tools from the Taiwan supplier is .
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
Related questions
Question
Yardwork Tools
Corp manufactures garden tools in a factory in Taneytown, Maryland. Recently, the company designed a collection of tools for professional use rather than consumer use. Management needs to make a good decision about whether to produce this line in their existing space in Maryland, where space is available or to accept an offer from a manufacturer in Taiwan. Data concerning the decision are as follows:
|
Expected annual sales of tools (in units)
|
660,000
|
|---|---|
|
Average selling price of tools
|
$11
|
|
Price quoted by Taiwanese company, in New Taiwanese Dollars (NTD)
|
27,300
|
|
Current exchange rate
|
9,100 NTD = $1
|
|
Variable
|
$2.85 per unit
|
|
Incremental annual fixed manufacturing costs associated with the new product line
|
$310,000
|
|
Variable selling and distribution costsª
|
$0.50 per unit
|
|
Annual fixed selling and distribution costsª
|
$250,000
|
ªSelling and distribution costs are the same regardless of whether the tools are manufactured in Maryland or
Requirement 1. Should
Yardwork Tools
Corp manufacture the
660,000
garden tools in the Maryland facility or purchase them from the supplier in Taiwan? Explain.|
The cost of manufacturing 660,000 garden tools in the Maryland facility is
|
|
and the cost of purchasing
|
|
660,000 garden tools from the Taiwan supplier is
|
|
.
|
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