Zion Manufacturing had always made its components in-house. However, Bryce Component Works had recently offered to supply one component, K2, at a price of $13 each. Zion uses 4,400 units of Component K2 each year. The cost per unit of this component is as follows: Direct materials Direct labor $7.84 2.84
Zion Manufacturing had always made its components in-house. However, Bryce Component Works had recently offered to supply one component, K2, at a price of $13 each. Zion uses 4,400 units of Component K2 each year. The cost per unit of this component is as follows: Direct materials Direct labor $7.84 2.84
Managerial Accounting: The Cornerstone of Business Decision-Making
7th Edition
ISBN:9781337115773
Author:Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger
Publisher:Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger
Chapter8: Tactical Decision-making And Relevant Analysis
Section: Chapter Questions
Problem 39E
Related questions
Question
![Zion Manufacturing had always made its components in-house. However, Bryce Component Works had recently offered to supply
one component, K2, at a price of $13 each. Zion uses 4,400 units of Component K2 each year. The cost per unit of this
component is as follows:
Direct materials
Direct labor
Variable overhead
Fixed overhead
Total
$7.84
2.84
1.67
4.00
$16.35
The fixed overhead is an allocated expense; none of it would be eliminated if production of Component K2 stopped.
Required:
1. What are the alternatives facing Zion Manufacturing with respect to production of Component K2?
2. List the relevant costs for each alternative. If required, round your answers to the nearest cent.
Total Relevant Cost
Make
per unit
Buy
per unit
Differential Cost to Make
per unit](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Fc0ccb318-df14-4cf7-ba16-d37125861fc1%2Fe9245f6a-dab0-4861-97ae-32a600313e5d%2Fiwygrdu_processed.png&w=3840&q=75)
Transcribed Image Text:Zion Manufacturing had always made its components in-house. However, Bryce Component Works had recently offered to supply
one component, K2, at a price of $13 each. Zion uses 4,400 units of Component K2 each year. The cost per unit of this
component is as follows:
Direct materials
Direct labor
Variable overhead
Fixed overhead
Total
$7.84
2.84
1.67
4.00
$16.35
The fixed overhead is an allocated expense; none of it would be eliminated if production of Component K2 stopped.
Required:
1. What are the alternatives facing Zion Manufacturing with respect to production of Component K2?
2. List the relevant costs for each alternative. If required, round your answers to the nearest cent.
Total Relevant Cost
Make
per unit
Buy
per unit
Differential Cost to Make
per unit
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