Ariel Gem Products is considering buying the casters it uses in the manufacture of office chairs...

 

 

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Ariel Gem Products is considering buying the casters it uses in the manufacture of office chairs from an outside vendor. Currently, Ariel Gem Products makes the casters in its own manufacturing facility. Ariel Gem products can buy the casters for $1.15 each. The company uses 450,000 casters each year. Information about Ariel Gem Products' cost to manufacture the 450,000 casters follows: Per Unit $.50 .10 Direct material Direct labor Variable overhead Fixed overhead Total Total $225,000 45,000 180,000 112,500 $562,500 .40 .25 $1.25 Fixed cost for Ariel Gem Products would not change if the company stopped making the casters. Required: Prepare a relevant cost schedule that indicates whether Ariel Gem Products should buy the casters or continue to make them. Ariel Gem Products is considering buying the casters it uses in the manufacture of office chairs from an outside vendor. Currently, Ariel Gem Products makes the casters in its own manufacturing facility. Ariel Gem products can buy the casters for $1.15 each. The company uses 450,000 casters each year. Information about Ariel Gem Products' cost to manufacture the 450,000 casters follows: Per Unit $.50 .10 Direct material Direct labor Variable overhead Fixed overhead Total Total $225,000 45,000 180,000 112,500 $562,500 .40 .25 $1.25 Fixed cost for Ariel Gem Products would not change if the company stopped making the casters. Required: Prepare a relevant cost schedule that indicates whether Ariel Gem Products should buy the casters or continue to make them.

Answer rating: 100% (QA)

Answer Calculation of Relevant Cost per unit Direct Material ... View the full answer