Review Question 2 ABC Co. wants to know if they should change their equipment or buy the product from an outside company. The cost to buy it from an outside supplier is $18.50. Using the old equipment, the costs are the following: Direct Material Direct Labour Manufacturing Overhead Supervision General Company Overhead Amortization-existing equipment Total Per unit $6.00 $8.40 $1.80 $1.60 $4.00 $1.90 $23.70 Should the company make or buy? Total $ 64,000 $160,000 $224,000 New equipment will be better and much more efficient. It will reduce direct labour by 30%. The new machine will cost $3.50 per unit. Old machine has no salvage value. Variable manufacturing overhead is 40 % of total manufacturing overhead. The General Company Overhead is not affected by the decision to buy the product.
Review Question 2 ABC Co. wants to know if they should change their equipment or buy the product from an outside company. The cost to buy it from an outside supplier is $18.50. Using the old equipment, the costs are the following: Direct Material Direct Labour Manufacturing Overhead Supervision General Company Overhead Amortization-existing equipment Total Per unit $6.00 $8.40 $1.80 $1.60 $4.00 $1.90 $23.70 Should the company make or buy? Total $ 64,000 $160,000 $224,000 New equipment will be better and much more efficient. It will reduce direct labour by 30%. The new machine will cost $3.50 per unit. Old machine has no salvage value. Variable manufacturing overhead is 40 % of total manufacturing overhead. The General Company Overhead is not affected by the decision to buy the product.
Cornerstones of Cost Management (Cornerstones Series)
4th Edition
ISBN:9781305970663
Author:Don R. Hansen, Maryanne M. Mowen
Publisher:Don R. Hansen, Maryanne M. Mowen
Chapter20: Inventory Management: Economic Order Quantity, Jit, And The Theory Of Constraints
Section: Chapter Questions
Problem 1CE: Thomas Corporation produces heating units. The following values apply for a part used in their...
Related questions
Question
Please help me with show all calculation thanku
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
Step by step
Solved in 3 steps
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.Recommended textbooks for you
Cornerstones of Cost Management (Cornerstones Ser…
Accounting
ISBN:
9781305970663
Author:
Don R. Hansen, Maryanne M. Mowen
Publisher:
Cengage Learning
Survey of Accounting (Accounting I)
Accounting
ISBN:
9781305961883
Author:
Carl Warren
Publisher:
Cengage Learning
Principles of Accounting Volume 2
Accounting
ISBN:
9781947172609
Author:
OpenStax
Publisher:
OpenStax College
Cornerstones of Cost Management (Cornerstones Ser…
Accounting
ISBN:
9781305970663
Author:
Don R. Hansen, Maryanne M. Mowen
Publisher:
Cengage Learning
Survey of Accounting (Accounting I)
Accounting
ISBN:
9781305961883
Author:
Carl Warren
Publisher:
Cengage Learning
Principles of Accounting Volume 2
Accounting
ISBN:
9781947172609
Author:
OpenStax
Publisher:
OpenStax College