Document1 - Microsoft Word Review View 1 24 91 AaBbCcDd AaBbCcDd AaBbCc AaBbCci AaBl AaBbCcL AaBbCcDd AaBbCcDd AaB 1 Normal No Spacing Heading 1 Heading 2 Title Subtitle Subtle Emp.. Emphasis Intens Paragraph Styles Direct materials per unit: $16 Direct labour per unit: $12.96 Indirect labour per unit: $1.78 Utilities per unit: $1.62 Fixed manufacturing costs to produce each thermostat component were: Cost item Direct Allocated Depreciation $5,940 $4,860 Property taxes 2,700 1080 Insurance 5,130 2,430 ABC Ltd. has offered Tyson a quote to purchase a similar thermostat component with the following information: 1. The lowest quotation for 18,000 units of thermostat component is $493,920 2. freight and inspection costs would be $0.72 per unit; receiving costs of $5,040 per year would be incurred by Tyson. 3. If the thermostat components are purchased on an ongoing basis, one of Tyon'sfactories would be closed. The facilities would be rented out to produce a net income of $32,400 per year. 4. If the thermostat components are purchased on an ongoing basis, a machine operator from the plant will be transferred to the procurement department (the employee's salary is $72,000). Required: 12"C + 111 O RI 112 "prt sc 10 DDI 8 19 144 $7 f5 & 8 O % 5 6 7 P R Y U O H KAaBbCcDd AaBbCcDd AaBbCc AaBbCci 1 Normal AaBl AaBbCcL AuBbCCDd AaBbCcDd AdB 1 No Spacing Heading 1 Heading 2 Title Subtitle Paragraph Subtle Emp.. Emphasis Inter Styles Question 3: (18 marks) Tyson Ltd. produces and sells premium hairdryers, which are the bestselling models in Australia and New Zealand. Their hair dryers require a thermostat component. Tyson's senior management expects to sell 18,000 units of hairdryer in the coming year. The company has internally produced the thermostat component. Recently, Tyson's CEO suggested the company shouldoutsourcethe thermostat componentto an external supplier. It is noted that theoutsourcing decision would eliminate all variable costs andsome of the fixed costs. Allocated costs will have to be absorbed by other production departments. Variable manufacturing costs to produce each thermostat component were: Direct materials per unit: $16 Direct labour per unit: $12.96 Indirect labour per unit: $1.78 Utilities per unit: $1.62 Fixed manufacturing costs to produce each thermostat component were: Cost item Direct Allocated Depreciation $5,940 $4,860 Property taxes 2,700 1080 Insurance 5,130 2.430 ABC Ltd. has offered Tyson a quote to purchase a similar thermostat component with the following information: 1. The lowest quotation for 18,000 units of thermostat component is $493,920 2. freight and inspection costs would be $0.72 per unit: receiving costs of $5.040 per 12"C O 112 Sort SC 10 -144 f7 + f5 & % 8 5 6 7 R Y U O P H KDocument1 - Microsoft Word Review View AaBbCcDd AaBbCcDd AaBbCc AaBbCcl 1 Normal AaBl AaBbCcL AuBbCcDd AuBbCcDd Ad 1 No Spacing Heading 1 Heading 2 Title Subtitle Paragraph Subtle Emp.. Emphasis Inte styles Required: a)Should Tyson continue to produce the thermostat in-house or purchase the component from ABC? Justify your answer with an appropriate incremental analysis.[12 marks] Click or tap here to enter text. b) What qualitative factors or strategic issues should the senior management consider in making this make-or-buy decision?[6 marks] Click or tap here to enter text. 12"C + 11 O +12 prt sc 10 DDI 8 144 f7 & O % 8 9 5 6 7 O P T Y U R K