Pitkin Company produces a part used in the manufacture of one of its products. The unit...
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Pitkin Company produces a part used in the manufacture of one of its products. The unit product cost of the part is $33, computed as follows: $12 Direct materials..... Direct labor..... 8 3 Variable manufacturing overhead. Fixed manufacturing overhead. Unit product cost... 10 An outside supplier has offered to provide the annual requirement of 10,000 of the parts for only $27 each. The company estimates that 30% of the fixed manufacturing overhead costs above will continue if the parts are purchased from the outside supplier. Assume that direct labor is an avoidable cost in this decision. Instructions: What will be your decision: to purchase from outsider or not? (Show your computations) Pitkin Company produces a part used in the manufacture of one of its products. The unit product cost of the part is $33, computed as follows: $12 Direct materials..... Direct labor..... 8 3 Variable manufacturing overhead. Fixed manufacturing overhead. Unit product cost... 10 An outside supplier has offered to provide the annual requirement of 10,000 of the parts for only $27 each. The company estimates that 30% of the fixed manufacturing overhead costs above will continue if the parts are purchased from the outside supplier. Assume that direct labor is an avoidable cost in this decision. Instructions: What will be your decision: to purchase from outsider or not? (Show your computations)
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Related Book For
Cost Management Measuring Monitoring and Motivating Performance
ISBN: 978-0470769423
2nd Canadian edition
Authors: Leslie G. Eldenburg, Susan Wolcott, Liang Hsuan Chen, Gail Cook
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