A manufacturing company produces four different types of raw materials: A, B, C, and D. The...
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A manufacturing company produces four different types of raw materials: A, B, C, and D. The costs of producing these raw materials are expected to be as follows: Production (units) Total Variable cost: Direct Material Direct Labour Variable Production Overhead Directly attributable fixed costs per annum are as follows: Incurred as a direct consequence of making A Incurred as a direct consequence of making B Incurred as a direct consequence of making C Incurred as a direct consequence of making D Other committed fixed costs A 2,000 B 4,000 C 8,000 D 6,000 $16,000 $40,000 $32,000 $48,000 $32,000 $72,000 $64,000 $72,000 $8,000 $24,000 $16,000 $24,000 $2,000 $10,000 $12,000 $16,000 $60,000 A subcontractor who is fairly new to the market agreed to supply the same raw materials of A, B, C, and D for $24, $42, $20, and $28, respectively. Required: a) Determine whether the manufacturing company should make or buy the components (show the working for each component). Justify your answer. (4 marks) b) Discuss the other factors that the manufacturing company should consider in making the decision in part (a). (6 marks) A manufacturing company produces four different types of raw materials: A, B, C, and D. The costs of producing these raw materials are expected to be as follows: Production (units) Total Variable cost: Direct Material Direct Labour Variable Production Overhead Directly attributable fixed costs per annum are as follows: Incurred as a direct consequence of making A Incurred as a direct consequence of making B Incurred as a direct consequence of making C Incurred as a direct consequence of making D Other committed fixed costs A 2,000 B 4,000 C 8,000 D 6,000 $16,000 $40,000 $32,000 $48,000 $32,000 $72,000 $64,000 $72,000 $8,000 $24,000 $16,000 $24,000 $2,000 $10,000 $12,000 $16,000 $60,000 A subcontractor who is fairly new to the market agreed to supply the same raw materials of A, B, C, and D for $24, $42, $20, and $28, respectively. Required: a) Determine whether the manufacturing company should make or buy the components (show the working for each component). Justify your answer. (4 marks) b) Discuss the other factors that the manufacturing company should consider in making the decision in part (a). (6 marks)
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a Deter mine whether the manufacturing company should make or buy the components show the working for each component Just ify your answer 4 marks ANS ... View the full answer
Related Book For
Intermediate Accounting
ISBN: 978-0324300987
10th Edition
Authors: Loren A Nikolai, D. Bazley and Jefferson P. Jones
Posted Date:
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