The Cerine Company manufactures thermostats consisting of relays, switches, and valves for home and...

 

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The Cerine Company manufactures thermostats – consisting of relays, switches, and valves – for home and industrial use. Cerine makes its own switches. The following table reports the current costs for HDS, its heavy duty switch, based on the analysis of its various manufacturing activities. Total current Current cost Expected of per unit ($) Expected cost cost unit cost total per producing 10,000 units ($) of producing ($) 10,000 next |year ($) 80,000 10,000 40,000 units Direct materials Direct labour Variable overhead costs for power and utilities Mixed (variable fixed) |overhead 80,000 10,000 manufacturing 40,000 8.00 80.00 1.00 1.00 4.00 4.00 and 17,500 1.75 20,000 2.00 manufacturing costs of material handling and setups Fixed overhead costs of plant lease, administration Total manufacturing 30,000 3.00 | 30,000 3.00 insurance, and manufacturing| 177,500 17,75 180,000 18.00 costs? Material handlings and set up activities occur each time batch of HDS is made. Cerine produces 20,000 units if HDS in 25 batches of 400 units each. The number of batches is the cost driver for these costs. Total materials handling and set up costs equal fixed cost of $5,000 plus $500 variable cost per batch ($5,000 + (25 x $500) = $17,500). Cerine commences production after it receives customer order. Cerine anticipates that next year , the 10,000 units of HDS expected to be sold will be manufactured in 50 batches of $200 units each. Through continuous improvement, Cerine expects to reduce variable cost per batch for materials handling and set up to $300. No other changes in fixed cost or variable costs per unit are anticipated. Another manufacture offers to sell Cerine 10,000 units of HDS next year for $16 per unit on whatever delivery schedule Cerine wants. Assume that financial factors predominate in this make or buy decision, should Cerine make or buy HDS? %3D The Cerine Company manufactures thermostats – consisting of relays, switches, and valves – for home and industrial use. Cerine makes its own switches. The following table reports the current costs for HDS, its heavy duty switch, based on the analysis of its various manufacturing activities. Total current Current cost Expected of per unit ($) Expected cost cost unit cost total per producing 10,000 units ($) of producing ($) 10,000 next |year ($) 80,000 10,000 40,000 units Direct materials Direct labour Variable overhead costs for power and utilities Mixed (variable fixed) |overhead 80,000 10,000 manufacturing 40,000 8.00 80.00 1.00 1.00 4.00 4.00 and 17,500 1.75 20,000 2.00 manufacturing costs of material handling and setups Fixed overhead costs of plant lease, administration Total manufacturing 30,000 3.00 | 30,000 3.00 insurance, and manufacturing| 177,500 17,75 180,000 18.00 costs? Material handlings and set up activities occur each time batch of HDS is made. Cerine produces 20,000 units if HDS in 25 batches of 400 units each. The number of batches is the cost driver for these costs. Total materials handling and set up costs equal fixed cost of $5,000 plus $500 variable cost per batch ($5,000 + (25 x $500) = $17,500). Cerine commences production after it receives customer order. Cerine anticipates that next year , the 10,000 units of HDS expected to be sold will be manufactured in 50 batches of $200 units each. Through continuous improvement, Cerine expects to reduce variable cost per batch for materials handling and set up to $300. No other changes in fixed cost or variable costs per unit are anticipated. Another manufacture offers to sell Cerine 10,000 units of HDS next year for $16 per unit on whatever delivery schedule Cerine wants. Assume that financial factors predominate in this make or buy decision, should Cerine make or buy HDS? %3D

Answer rating: 100% (QA)

The making would be beneficial by 7500 than buying The per savings in making would be 075 ... View the full answer