Tampa Grills manufacturers gas grills for home use. Each finished unit (i.e. gas grill) has two...
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Tampa Grills manufacturers gas grills for home use. Each finished unit (i.e. gas grill) has two burners (component parts). Currently Tampa Grill manufactures the burners and other component parts. Next year, Tampa Grill anticipates producing and selling 7,500 gas grills, which will require production of 15,000 burners. Each finished grill retails at $125.00. Terry, the Controller, has collected data on the following production costs: Per Component Monthly (at current production) $270,000 $180,000 $120,000 Direct Materials Direct Labor Var. Overhead Inspection Costs Machine Rental Plant Overhead Total Costs (Burner) $18.00 $12.00 $ 8.00 $ 10,000 $ 15,000 $ 80,000 $675,000 Tampa Grills is considering outsourcing production of the burners. One supplier, Brandon Burners, has bid $42.00 per burner. Tamp Grills also rents some specialized machinary to produce the grills. This equipment is not used for any other product or component. If Tampa Grills were to outsource production of the burners it would no longer need to rent the machinery. a. If Tampa Grills purchases the burners from Brandon Burners (the outside vendor), the factory space currently being used to produce the burners will remain idle. Should Tampa Grills continue to produce the burners itself, or should Tampa Grills outsource production to Brandon Burners? Show all calculations. b. Upon further analysis. Terry determined that the idle factory space could be repurposed o produce 4,000 rotisserie grills (a separate product). Each rotisserie grill sells for $52.00 and requires $45.00 in variable costs. The rotisserie grill will require purchase of a specialized "tooling" equipment, which will increase fixed costs by $160,000 per period. Should Tampa Grill outsource production of the burners? Tampa Grills manufacturers gas grills for home use. Each finished unit (i.e. gas grill) has two burners (component parts). Currently Tampa Grill manufactures the burners and other component parts. Next year, Tampa Grill anticipates producing and selling 7,500 gas grills, which will require production of 15,000 burners. Each finished grill retails at $125.00. Terry, the Controller, has collected data on the following production costs: Per Component Monthly (at current production) $270,000 $180,000 $120,000 Direct Materials Direct Labor Var. Overhead Inspection Costs Machine Rental Plant Overhead Total Costs (Burner) $18.00 $12.00 $ 8.00 $ 10,000 $ 15,000 $ 80,000 $675,000 Tampa Grills is considering outsourcing production of the burners. One supplier, Brandon Burners, has bid $42.00 per burner. Tamp Grills also rents some specialized machinary to produce the grills. This equipment is not used for any other product or component. If Tampa Grills were to outsource production of the burners it would no longer need to rent the machinery. a. If Tampa Grills purchases the burners from Brandon Burners (the outside vendor), the factory space currently being used to produce the burners will remain idle. Should Tampa Grills continue to produce the burners itself, or should Tampa Grills outsource production to Brandon Burners? Show all calculations. b. Upon further analysis. Terry determined that the idle factory space could be repurposed o produce 4,000 rotisserie grills (a separate product). Each rotisserie grill sells for $52.00 and requires $45.00 in variable costs. The rotisserie grill will require purchase of a specialized "tooling" equipment, which will increase fixed costs by $160,000 per period. Should Tampa Grill outsource production of the burners?
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a Total Costs to produce burners inhouse 675000 Cost to purchase burners from outs... View the full answer
Related Book For
Cost Accounting A Managerial Emphasis
ISBN: 978-0132109178
14th Edition
Authors: Charles T. Horngren, Srikant M.Dater, George Foster, Madhav
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