Alto Company currently produces component TH1 for its sole product. The equipment that it uses to...
Fantastic news! We've Found the answer you've been seeking!
Question:
Transcribed Image Text:
Alto Company currently produces component TH1 for its sole product. The equipment that it uses to produce TH1 must be replaced, and management must decide whether to replace the equipment or buy TH1 from an outside supplier. The current cost per unit to manufacture its required 400,000 units of TH1 follows. Direct materials $1.20 Direct labor 1.50 Overhead 6.00 Total cost per unit $8.70 Direct materials and direct labor are 100% variable. Overhead is 75% fixed, and the current fixed over- head includes $1 per unit depreciation on the old equipment. If management buys the new equipment, it will incur depreciation of $1.50 per unit. An outside supplier has offered to supply the 400,000 units of TH1 for $4 per unit. Required I. Determine whether management should make or buy the TH1. 2. What factors besides cost must management consider when deciding whether to make or buy TH1? Alto Company currently produces component TH1 for its sole product. The equipment that it uses to produce TH1 must be replaced, and management must decide whether to replace the equipment or buy TH1 from an outside supplier. The current cost per unit to manufacture its required 400,000 units of TH1 follows. Direct materials $1.20 Direct labor 1.50 Overhead 6.00 Total cost per unit $8.70 Direct materials and direct labor are 100% variable. Overhead is 75% fixed, and the current fixed over- head includes $1 per unit depreciation on the old equipment. If management buys the new equipment, it will incur depreciation of $1.50 per unit. An outside supplier has offered to supply the 400,000 units of TH1 for $4 per unit. Required I. Determine whether management should make or buy the TH1. 2. What factors besides cost must management consider when deciding whether to make or buy TH1?
Expert Answer:
Answer rating: 100% (QA)
1 The decision between make or buy is arrived at by comparing the costs of buying and those of making and accepting the lower Making Total variable co... View the full answer
Related Book For
Posted Date:
Students also viewed these accounting questions
-
Alto Company currently produces component TH1 for its sole product. The equipment that it uses to produce TH1 must be replaced, and management must decide whether to replace the equipment or buy TH1...
-
Haver Company currently produces component RX5 for its sole product. The equipment that is used to produce RX5 must be replaced, and management must decide whether to replace the equipment or buy RX5...
-
145. Allzine Ltd currently buys 19 000 subcomponents from an outside supplier at $15 each. The company has excess capacity, which it sublets to another company for $50 000 per year. If the company...
-
7 8 0 The following data is provided for the Piedmont Corporation. All costs are actual costs. Complete the cost flows diagram attached to this problem and calculate CGM and CGS. Prepare journal...
-
Prove that every continuous piecewise affine function based on the mesh points x0 where (a) What are the values of a and b? (b) Write the hat function (11.168) in the form (11.179) . (c) Write the...
-
Establish the identity. 1 + cos 0 sin3 csc 0 1 - cos 0
-
Determine if the mixed method aspect is concurrent, sequential,, or nested. Develop a hypothetical research scenario that would necessitate the use of the Mixed Method A-B-A Design. The research will...
-
AnimPix, Inc., is a small company that creates computer-generated animations for films and television. Much of the company's work consists of short commercials for television, but the company also...
-
Why is the relational model more important above the other models?
-
10 6. 4. 5. 7. PROJECT STEPS Carla Arranga is a senior account manager at Ensight Healthcare Consultants, a consulting firm that works with hospitals, clinics, and other healthcare providers around...
-
1. Outline the purpose of an Ethics Committee.Briefly describe their function and role.How do they benefit the patient, staff and healthcare organization? 2. Should a hospital be permitted to make...
-
Wallsburg Company reported pretax financial income in its income statement of $100,000. Among the items included in the computation of pretax financial income were the following: Warranty expenses...
-
Electronics Incorporated maintains its factory in Stillwater, Oklahoma, but has its main office in Tulsa. On September 1, the factory trial balance appeared as follows :Accounts Dr. Cr.Materials $...
-
A company designs fish tanks of various sizes. Because of shipping restrictions, a fish tank's height (1 vertical edge) and the entire perimeter of the base (4 edges along the bottom) cannot be more...
-
Question 2. Solve the profit maximization problem and show that factor intensities are governed by the first order conditions ak(t)a- = r(t) +8
-
The oxidation of ethanedioate (oxalate) ions by manganate(VII) ions can be represented by the half equations: CO4 (aq)2CO2(g) + 2e MnO4 (aq) + 8H(aq) + 5e Mn2(aq) + 4HO(1) What volume (in cm) of...
-
Aa A A Paragraph N AAA Questions Styles 12 17 Select Editing Part 3: Reflection Report For this assessment you are asked to reflect on your role play as a worker and answer the following: 1. What...
-
A liquid flows upward through a valve situated in a vertical pipe. Calculate the differential pressure (kPa) between points A and B. The mean velocity of the flow is 4.1 m/s. The specific gravity of...
-
Key comparative information for DSG international plc (DSGiplc.com) follows. Required 1. Compute the recent two years cash flow on total assets ratio for DSG. 2. How does DSGs ratio compare to Best...
-
C&H Ski Club recently borrowed money and agrees to pay it back with a series of six annual payments of $5,000 each. C&H subsequently borrows more money and agrees to pay it back with a series of four...
-
Selected year-end financial statements of Cadet Corporation follow. (All sales were on credit; selected balance sheet amounts at December 31, 2008, were inventory, $56,900; total assets, $219,400;...
-
The codon change (Gly-12 to Val-12) in human H-ras that converts it to oncogenic H-ras has been associated with many types of cancers. For this reason, researchers would like to develop drugs to...
-
Outline the general strategy used in metagenomics.
-
You need to understand the approach described in question 3 in More Genetic TIPS before answering this question. A muscle-specific gene was cloned and then subjected to promoter bashing. As shown...
Study smarter with the SolutionInn App