Bonneville Company is producing a subassembly used in the production of a product. The costs incurred...

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Bonneville Company is producing a subassembly used in the production of a product. The costs incurred for the subassembly follow: Per Unit Direct materials $ 6.00 Direct labor 4.00 Variable factory overhead 1.00 Fixed supervisor salary 3.00 Depreciation expense on factory equipment 2.00 General fixed factory overhead allocated 5.00 Total costs $21.00 The above per unit costs are based on 8,000 units. An outside supplier will provide 8,000 subassemblies for $19 per unit. The supervisor will be terminated if the subassemblies are not produced in house. The idle factory will be used to manufacture another product with a contribution margin of $60,000. Requirements: 1. What should Bonneville do? Explain your decision in detail Show all calculations. 2. What other factors should Bonneville consider? (DCLor A! T+EN+F10 (Mac) Bonneville Company is producing a subassembly used in the production of a product. The costs incurred for the subassembly follow: Per Unit Direct materials $ 6.00 Direct labor 4.00 Variable factory overhead 1.00 Fixed supervisor salary 3.00 Depreciation expense on factory equipment 2.00 General fixed factory overhead allocated 5.00 Total costs $21.00 The above per unit costs are based on 8,000 units. An outside supplier will provide 8,000 subassemblies for $19 per unit. The supervisor will be terminated if the subassemblies are not produced in house. The idle factory will be used to manufacture another product with a contribution margin of $60,000. Requirements: 1. What should Bonneville do? Explain your decision in detail Show all calculations. 2. What other factors should Bonneville consider? (DCLor A! T+EN+F10 (Mac)

Answer rating: 100% (QA)

1 The company must accept the outside suppliers offer if the total relevant cost to buy the subassem... View the full answer