Apply: Short-Term Decision Making AC 522 FA 24 Short Term Decisions Workbook.xIsx Make or Buy Decision Requirement A Direct materials Direct labor Variable costs Fixed costs Purchase price Opportunity Costs Total event costs Requirement B Direct materials Direct labor Variable costs Fixed costs Purchase price Opportunity Costs Total event costs @ montevallo.instructure.com Make Net income Buy Increase ecrease Make Net income Buy Increase ecrease tevallo.instructure.com Apply: Short-Term Decision Making AC 522 FA 24 Term Decisions Workbook.xIsx Special Order Special order information: Number of cookies in the order 550 Customer's desired unit price s 0.85 Expected unit logo cost s 031 Student Work Area Average Average Average Unit Profit Date Unit SP Unit VC _ UnitCM _Allocated FC _ Margin 6/1 0.950 0.470 0.480 0.105 0.375 a. Monthly average unit amounts 6/2 0.950 0.472 0478 0.106 0.372 Average unit selling price 6/3 0.950 0.468 0.482 0.104 0.378 6/4 0.950 0.469 0.481 0.107 0.374 Average unit variable cost 6/5 0.950 0.467 0483 0.103 0.380 6/6 0.950 0.473 0.477 0.108 0.369 Average unit allocated fixed cost 6/7 0.950 0.474 0.476 0.107 0.369 6/8 0.950 0.472 0478 0.106 0.372 Average unit contribution margin 6/9 0.950 0.468 0.482 0.104 0.378 6/10 0.950 0.469 0.481 0.107 0.374 6/11 0.950 0.467 0.483 0.103 0.380 b. Special order analysis 6/12 0.950 0.474 0476 0.104 0.372 Per Unit Total 6/13 0.950 0.472 0478 0.107 0.371 Selling price per special order 6/14 0.950 0.468 0.482 0.108 0.374 Less relevant costs: 6/15 0.950 0.468 0.482 0.103 0.379 6/16 0.950 0.468 0.482 0.100 0.382 6/17 0.950 0.469 0.481 0.103 0.378 6/18 0.950 0.467 0483 0.101 0.382 6/19 0.950 0.473 0.477 0.104 0.373 6/20 0.950 0.474 0.476 0.103 0373 6/21 0.950 0.469 0.481 0.108 0.373 6/22 0.950 0.467 0483 0.107 0.376 6/23 0.950 0.469 0.481 0.103 0.378 6/24 0.950 0.467 0483 0.108 0.375 6/25 0.950 0.464 0.486 0.107 0.379 6/26 0.950 0.465 0.485 0.102 0.383 6/27 0.950 0.474 0.476 0.105 0.371 6/28 0.950 0.476 0474 0.106 0.368 6/29 0.950 0.485 0.465 0.108 0.357 6/30 0.950 0.466 0.484 0.102 0.382 AC 522 FA 24 Short-Term Decision-Making Student Name Make or Buy Decision Vector manufactures 25,000 units of a part that is used in their assembly process. The production costs are as follows: Direct materials $2.00 per unit Direct labor $0.80 per unit Variable Overhead Costs $1.40 per unit Fixed Overhead Costs $25,000 Vector has the option of purchasing these units from an outside supplier at $6 per unit. If the part is outsourced, 40% of the fixed costs cannot be immediately converted to other uses. Requirement A: What is the financial advantage (disadvantage) of buying the 25,000 parts from the outside supplier instead of making them? Should Vector make or buy the part? Why or why not? Name two qualitative factors Vector should consider. Requirement B: If the part is outsourced, Vector can use the released productive capacity to generate additional income of $40,000 from producing a different product. What are the opportunity costs? What is the financial advantage (disadvantage) of buying the 25,000 parts from the outside supplier instead of making them? Should Vector make or buy the part? Why or why not? Special Order Sweet Relief wants to examine if it should accept a special order by a customer to purchase a large order of specialty cookies. e Daily average unit selling prices and current units costs to produce are provided. e Unit costs vary depending on toppings and labor to produce even though all doughnuts are sold for the same unit price. * Cookies with special toppings sell in approximately the same daily sales mix, and the special order will be sold in the same sales mix. As such, the company has decided to use average costs for the most recent month. Fixed costs are allocated to units based on direct labor costs. Demand of regular sales will not be affected if the special order is accepted. The average number of units sold each day does not differ significantly. The customer wants the company's logo on the cookies, which will require an additional cost