E-Bike Ltd is a company that producing and selling Electric Bicycle. The Bicycle contains electronic components....
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E-Bike Ltd is a company that producing and selling Electric Bicycle. The Bicycle contains electronic components. The company is expecting to produce 20 000 units of Bicycles. Currently, E-Bike Ltd makes the electronic components in-house for the Bicycles. The cost data to make the electronic components for 30 000 Bicycles are as follows: Direct material cost per unit Direct labour cost per unit Variable manufacturing overhead $900 $600 $300 Inspection, set-up, material handling per batch $10 000 Allocated committed fixed cost (admin, taxes and insurance) $5 000 000 Recently, E-Bike Ltd received a call from an outside supplier who offered to supply the electronic components at $1 800 per electronic components. The management of E-Bike Ltd considers this offer and starts to obtain more data before making the decision. Inspection, set-up, and materials handling costs vary with the number of batches in which the electronic components are produced. E-Bike Ltd produces the electronic components for the Bicycle in batch sizes of 1 000 units and will produce the 20 000 units in 20 batches. Required (show your workings): (a) Assume that E-Bike Ltd purchases the electronic components from the outside supplier, the facility where the electronic components are currently made will remain idle (unused). Based on financial considerations alone, should E-Bike Ltd accept or reject the offer from the outside vendor at the anticipated production (and sales) volume 20 000 units? (b Assume that, if the electronic components are purchase from outside, the facilities where the electronic components are currently made will be used to make a new product that will bring a contribution of $10 500 000. An additional tooling costs of $10 000 000 would be incurred to make this new product. Based on financial considerations alone, should E-Bike Ltd make or buy the electronic components, if 20 000 Bicycles are produced and sold? (c) Using the part (b) assumption, the sales manager of E-Bike Ltd is concerned that the estimation of 20 000 units may be too high and it is believed that only 18 000 units will be sold and therefore it needs to buy only 18,000 units. At this lower output, E-Bike Ltd will produce the electronic components in 18 batches of 1 000 units each. Based on financial considerations alone, should E-Bike Ltd purchase the electronic components from the outsider suppliers? (5 marks) (8 marks) (7 marks) E-Bike Ltd is a company that producing and selling Electric Bicycle. The Bicycle contains electronic components. The company is expecting to produce 20 000 units of Bicycles. Currently, E-Bike Ltd makes the electronic components in-house for the Bicycles. The cost data to make the electronic components for 30 000 Bicycles are as follows: Direct material cost per unit Direct labour cost per unit Variable manufacturing overhead $900 $600 $300 Inspection, set-up, material handling per batch $10 000 Allocated committed fixed cost (admin, taxes and insurance) $5 000 000 Recently, E-Bike Ltd received a call from an outside supplier who offered to supply the electronic components at $1 800 per electronic components. The management of E-Bike Ltd considers this offer and starts to obtain more data before making the decision. Inspection, set-up, and materials handling costs vary with the number of batches in which the electronic components are produced. E-Bike Ltd produces the electronic components for the Bicycle in batch sizes of 1 000 units and will produce the 20 000 units in 20 batches. Required (show your workings): (a) Assume that E-Bike Ltd purchases the electronic components from the outside supplier, the facility where the electronic components are currently made will remain idle (unused). Based on financial considerations alone, should E-Bike Ltd accept or reject the offer from the outside vendor at the anticipated production (and sales) volume 20 000 units? (b Assume that, if the electronic components are purchase from outside, the facilities where the electronic components are currently made will be used to make a new product that will bring a contribution of $10 500 000. An additional tooling costs of $10 000 000 would be incurred to make this new product. Based on financial considerations alone, should E-Bike Ltd make or buy the electronic components, if 20 000 Bicycles are produced and sold? (c) Using the part (b) assumption, the sales manager of E-Bike Ltd is concerned that the estimation of 20 000 units may be too high and it is believed that only 18 000 units will be sold and therefore it needs to buy only 18,000 units. At this lower output, E-Bike Ltd will produce the electronic components in 18 batches of 1 000 units each. Based on financial considerations alone, should E-Bike Ltd purchase the electronic components from the outsider suppliers? (5 marks) (8 marks) (7 marks)
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Answer rating: 100% (QA)
a To determine whether EBike Ltd should accept or reject the offer from the outside supplier at the anticipated production volume of 20000 units we need to compare the total cost of making the electro... View the full answer
Related Book For
Cost Accounting A Managerial Emphasis
ISBN: 978-0133392883
6th Canadian edition
Authors: Horngren, Srikant Datar, George Foster, Madhav Rajan, Christ
Posted Date:
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