Gilberto Company currently manufactures 65,000 units per year of one of its crucial parts. Variable costs are $1.95 per unit, fixed costs related to making this part are $75,000 per year, and allocated fixed costs are $62,000 per year. Allocated fixed costs are unavoidable whether the company makes or buys the part. Gilberto is considering buying the part from a supplier for a quoted price of $3.25 per unit guaranteed for a three-year period. Should the company continue to manufacture the part, or should it buy the part from the outside supplier? Support your answer with analyses.
Answer to relevant QuestionsIdentify each of the following terms/phrases as either an accounting: (a) Principle, (b) Assumption, (c) Constraint. 1. Materiality 2. Time period 3. Benefit exceeds cost 4. Revenue recognition Ming Chen began a professional practice on June 1 and plans to prepare financial statements at the end of each month. During June, Ming Chen (the owner) completed these transactions: a. Owner invested $60,000 cash in the ...Assume Apple invested $2.12 billion to expand its manufacturing capacity. Assume that these assets have a 10-year life, and that Apple requires a 10% internal rate of return on these assets. Required What is the amount of ...Refer to the information in QS. Compute the overhead activity rate for each activity, assuming the company uses activity-based costing. In QS Dave Krug finances a new automobile by paying $6,500 cash and agreeing to make 40 monthly payments of $500 each, the first payment to be made one month after the purchase. The loan bears interest at an annual rate of 12%. ...
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