ACCOUNTING PRINCIPLES 222 5/16 >C<
2nd Edition
ISBN: 9781323461525
Author: Horngren
Publisher: PEARSON C
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Chapter 25, Problem P25.31BPGB
Making outsourcing decisions
Winter Sports manufactures snowboards. Its cost of making 2, 100 bindings is as follows:
Direct materials $ 17,600 Direct labor 2,600 Variableoverhead 2, 120 Fixed overhead 6,800 Totalmanufacturing costs for 2, 100 bindings $ 29,120
Suppose Lewis will sell bindings to Winter Sports for $15 each. Winter Sports would pay $2 per unit to transport the bindings to its manufacturing plant, where it would add its own logo at a cost of $0.40 per binding.
Requirements
1. Winter Sports’s accountants predict that purchasing the bindings from will enable the company to avoid $2, 100 of fixed overhead. Prepare an analysis to showwhether Winter Sports should make or buy the bindings.
2. The facilities freed by purchasing bindings from Lewis can be used to manufacture
another product that will contribute $3,100 to profit. Total fixed costs will be the same as if Winter Sports had produced the bindings. Show which alternative makes the best use of Winter Sports’s facilities: (a) make bindings, (b) buy bindings and leave facilities idle, or (c) buy bindings and make another product.
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Students have asked these similar questions
Baird Electronics currently produces the shipping containers it uses to deliver the electronics products it sells. The monthly cost of
producing 9,100 containers follows.
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6,400
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Allocated facility-level costs
*One-third of these costs can be avoided by purchasing the containers.
Russo Container Company has offered to sell comparable containers to Baird for $2.60 each.
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a. Calculate the total relevant cost. Should Baird continue to make the containers?
b. Baird could lease the space it currently uses in the manufacturing process. If leasing would produce $11,200 per month, calculate
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a. Total relevant cost
Should Baird continue to make the containers?
b. Total avoidable cost
Should Baird continue to make the containers?
What are the fixed overhead costs of making the component?
Vaughn, Inc. currently manufactures a wicket as its main product. Costs per unit are as follows:
Direct materials and direct labor $11
Variable overhead
Fixed overhead
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5
8
$24
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O Make because the cost savings is $12800
◇ Buy because the cost savings is $6400
○ Buy because the cost savings is $19200
○ Make because the cost savings is $6400
Chapter 25 Solutions
ACCOUNTING PRINCIPLES 222 5/16 >C<
Ch. 25 - Prob. 1QCCh. 25 - Prob. 2QCCh. 25 - Which of the following costs are irrelevant to...Ch. 25 - Prob. 4QCCh. 25 - Prob. 5QCCh. 25 - 6. When companies are price-setters, their...Ch. 25 - Prob. 7QCCh. 25 - Prob. 8QCCh. 25 - Prob. 9QCCh. 25 - Prob. 10QC
Ch. 25 - Prob. 1RQCh. 25 - Prob. 2RQCh. 25 - Prob. 3RQCh. 25 - Prob. 4RQCh. 25 - Prob. 5RQCh. 25 - What is differential analysis?Ch. 25 - Prob. 7RQCh. 25 - Prob. 8RQCh. 25 - Prob. 9RQCh. 25 - Prob. 10RQCh. 25 - Prob. 11RQCh. 25 - Prob. 12RQCh. 25 - Prob. 13RQCh. 25 - Prob. 14RQCh. 25 - Prob. 15RQCh. 25 - Prob. 16RQCh. 25 - Prob. 17RQCh. 25 - Prob. 18RQCh. 25 - Prob. 19RQCh. 25 - Prob. 20RQCh. 25 - Prob. 21RQCh. 25 - Prob. 22RQCh. 25 - Prob. 23RQCh. 25 - Prob. 24RQCh. 25 - Prob. 25RQCh. 25 - Prob. 26RQCh. 25 - Prob. S25.1SECh. 25 - Prob. S25.2SECh. 25 - Prob. S25.3SECh. 25 - Prob. S25.4SECh. 25 - Prob. S25.5SECh. 25 - Prob. S25.6SECh. 25 - Prob. S25.7SECh. 25 - Prob. S25.8SECh. 25 - Prob. E25.9ECh. 25 - Prob. E25.10ECh. 25 - Prob. E25.11ECh. 25 - Prob. E25.12ECh. 25 - Prob. E25.13ECh. 25 - Prob. E25.14ECh. 25 - Prob. E25.15ECh. 25 - Prob. E25.16ECh. 25 - Prob. E25.17ECh. 25 - Making outsourcing decisions Eclipse Systems...Ch. 25 - Prob. E25.19ECh. 25 - Prob. E25.20ECh. 25 - Prob. P25.21APGACh. 25 - Prob. P25.22APGACh. 25 - Making Decisions a product decisions Members of...Ch. 25 - Prob. P25.24APGACh. 25 - Prob. P25.25APGACh. 25 - Prob. P25.26APGACh. 25 - Prob. P25.27BPGBCh. 25 - Prob. P25.28BPGBCh. 25 - Prob. P25.29BPGBCh. 25 - Prob. P25.30BPGBCh. 25 - Making outsourcing decisions Winter Sports...Ch. 25 - Prob. P25.32BPGBCh. 25 - Prob. P25.33CPCh. 25 - Prob. 25.1EI
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