Why Choose Us?
0% AI Guarantee
Human-written only.
24/7 Support
Anytime, anywhere.
Plagiarism Free
100% Original.
Expert Tutors
Masters & PhDs.
100% Confidential
Your privacy matters.
On-Time Delivery
Never miss a deadline.
Concordia University - COMM 305 Calc, Inc
Concordia University - COMM 305
Calc, Inc. owns a machine that produces baskets for the gift packages the company sells. The company uses 1,000 baskets in production each month. The costs of making one basket is $7 for direct materials, $5 for variable manufacturing overhead, $4 for direct labour and $8 for fixed manufacturing overhead. The unit cost is based on the monthly production of 1,000 baskets. The company determined that 25% of the fixed manufacturing overhead is avoidable. An outside supplier has offered to sell Calc the baskets for $15 each, and can supply all the units it needs. Prepare an incremental analysis to determine if Calc should buy the component from the supplier.
Expert Solution
Answer:
|
Incremental cost to buy (1,000 x $15) |
($15,000) |
|
|
|
Incremental cost savings: DM ($7 x 1,000) |
+7,000 |
|
|
|
VOH ($5 x 1,000) |
+5,000 |
|
|
|
DL ($4 x 1,000) |
+4,000 |
|
|
|
FOH ($8 x 25% x 1,000) |
+2,000 |
|
|
|
Total savings to buy |
($3,000) |
|
|
|
OR |
|
|
|
|
Incremental cost to buy (1,000 x $15) |
|
Make |
Buy $15,000 |
|
Incremental costs to make: DM ($7 x 1,000) |
$7,000 |
|
|
VOH ($5 x 1,000) |
5,000 |
|
|
DL ($4 x 1,000) |
4,000 |
|
|
FOH |
8,000 |
6,000 |
|
Incremental cost to buy |
$24,000 |
$21,000 |
Archived Solution
You have full access to this solution. To save a copy with all formatting and attachments, use the button below.
For ready-to-submit work, please order a fresh solution below.
