Nakamura Company produces bluetooth speakers for home or office purposes, sold at a price of $30...
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Nakamura Company produces bluetooth speakers for home or office purposes, sold at a price of $30 per unit. The current production and sales volume is 25,000 per year and its capacity is 30,000 units per year. Nakamura wants to sign a contract with an electronics store to supply 10,000 units by next year at a cost of $19. To fulfill the offer, Nakamura has two options: 1) Insource 5,000 units and outsource another 5,000 units. 2) Outsource all 10,000 units and rent unused capacity to an outside firm for $19,000 per year. Hereby the manufacturing and other costs: Variable costs per unit: Direct materials Direct labor Factory overhead Distribution Marketing $11.00 5.50 3.30 1.10 0.7 Fixed costs per month: Factory overhead Selling and admin. Total $156,000 72,000 $228,000 Nakamura can buy the speakers from an outside supplier at $19.7 per unit. Additionally, if Nakamura accepts the contract, the speakers should be specially packed which would increase cost by $0.3 per unit. Required: 1. Analyze the two options! (8%) 2. What is the best recommendation for Nakamura? Why? (7%) 3. What should Nakamura consider before buying speakers from an outside supplier? Mention at least three (3) factors. (5%) Nakamura Company produces bluetooth speakers for home or office purposes, sold at a price of $30 per unit. The current production and sales volume is 25,000 per year and its capacity is 30,000 units per year. Nakamura wants to sign a contract with an electronics store to supply 10,000 units by next year at a cost of $19. To fulfill the offer, Nakamura has two options: 1) Insource 5,000 units and outsource another 5,000 units. 2) Outsource all 10,000 units and rent unused capacity to an outside firm for $19,000 per year. Hereby the manufacturing and other costs: Variable costs per unit: Direct materials Direct labor Factory overhead Distribution Marketing $11.00 5.50 3.30 1.10 0.7 Fixed costs per month: Factory overhead Selling and admin. Total $156,000 72,000 $228,000 Nakamura can buy the speakers from an outside supplier at $19.7 per unit. Additionally, if Nakamura accepts the contract, the speakers should be specially packed which would increase cost by $0.3 per unit. Required: 1. Analyze the two options! (8%) 2. What is the best recommendation for Nakamura? Why? (7%) 3. What should Nakamura consider before buying speakers from an outside supplier? Mention at least three (3) factors. (5%)
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Answer rating: 100% (QA)
1 Analysis of the two options Option 1 To fulfill the order Nakamura needs to produce an additional 10000 units The cost of production for Nakamura is ... View the full answer
Related Book For
Managerial Accounting
ISBN: 978-1259024900
9th canadian edition
Authors: Ray Garrison, Theresa Libby, Alan Webb
Posted Date:
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