The following production costs are provided for AudioPro Company, a manufacturer of high-quality headphones. Manufacturing Costs...

 

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The following production costs are provided for AudioPro Company, a manufacturer of high-quality headphones. Manufacturing Costs Direct Materials Direct Labor Variable Overhead Fixed Overhead Total $ 60 38 22 50 $ 170 It has been determined that the headphones could be purchased from Integrated Labs at a cost of $135 plus $8 shipping costs. Assume 40% of fixed overhead allocated to making headphones relates to a production manager who would not be retained if the headphones were not produced by AudioPro. Required: a. Considering the offer from Integrated Labs, show whether AudioPro should make or buy the product. b. How would your analysis change if AudioPro could use capacity resources for alternative activities that would produce a contribution of $35 per unit? The following production costs are provided for AudioPro Company, a manufacturer of high-quality headphones. Manufacturing Costs Direct Materials Direct Labor Variable Overhead Fixed Overhead Total $ 60 38 22 50 $ 170 It has been determined that the headphones could be purchased from Integrated Labs at a cost of $135 plus $8 shipping costs. Assume 40% of fixed overhead allocated to making headphones relates to a production manager who would not be retained if the headphones were not produced by AudioPro. Required: a. Considering the offer from Integrated Labs, show whether AudioPro should make or buy the product. b. How would your analysis change if AudioPro could use capacity resources for alternative activities that would produce a contribution of $35 per unit?

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To determine whether AudioPro should make or buy the product we need to compare the total cost of ma... View the full answer