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Assume the company could eliminate one production supervisor with a salary of $30,000 if the component is purchased from an outside supplier. Indicate if the company should make or buy the component and the total dollar difference in favor of that alternati

Assume the company could eliminate one production supervisor with a salary of $30,000 if the component is purchased from an outside supplier. Indicate if the company should make or buy the component and the total dollar difference in favor of that alternati

Cornerstones of Cost Management (Cornerstones Series)
Cornerstones of Cost Management (Cornerstones Series)
4th Edition
ISBN:9781305970663
Author:Don R. Hansen, Maryanne M. Mowen
Publisher:Don R. Hansen, Maryanne M. Mowen
Chapter17: Activity Resource Usage Model And Tactical Decision Making
Section: Chapter Questions
Problem 18E: A company is considering a special order for 1,000 units to be priced at 8.90 (the normal price...
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Assume the company could eliminate one production supervisor with a salary of $30,000 if the component is purchased from an outside supplier. Indicate if the company should make or buy the component and the total dollar difference in favor of that alternative.

The management of Whalen Industries has been evaluating whether the company should continue manufacturing a component or buy it from an outside supplier. A $100 cost per component was determined as follows: Direct material Direct labor | Variable manufacturing overhead Fixed manufacturing overhead $ 15 40 10 35 $100 Whalen Industries uses 4,000 components per year. After Wilfert Corporation submitted a bid of $80 per component, some members of management felt they could reduce costs by buying from outside and discontinuing production of the component. If the component is obtained from Wilfert Corporation, Whalen Industries' unused production facilities could be leased to another company for $50,000 per year.
Transcribed Image Text:The management of Whalen Industries has been evaluating whether the company should continue manufacturing a component or buy it from an outside supplier. A $100 cost per component was determined as follows: Direct material Direct labor | Variable manufacturing overhead Fixed manufacturing overhead $ 15 40 10 35 $100 Whalen Industries uses 4,000 components per year. After Wilfert Corporation submitted a bid of $80 per component, some members of management felt they could reduce costs by buying from outside and discontinuing production of the component. If the component is obtained from Wilfert Corporation, Whalen Industries' unused production facilities could be leased to another company for $50,000 per year.
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