XYZ Corporation manufactures widgets. Each widget goes through the machining and assembly departments. Recently, XYZ Corporation...
Fantastic news! We've Found the answer you've been seeking!
Question:
Transcribed Image Text:
XYZ Corporation manufactures widgets. Each widget goes through the machining and assembly departments. Recently, XYZ Corporation has been approached by Alpha Suppliers, an external company which has offered to supply one of the key components of the widget at a fixed price. XYZ Corporation is considering whether to accept the offer from Alpha Suppliers or to continue making the component in- house. Relevant information: XYZ Corporation's annual requirement for the component: 100,000 units Cost to make the component in-house: • Direct materials: $5.00 per unit • Direct labor (machining): $3.00 per unit • Direct labor (assembly): $2.00 per unit . Variable manufacturing overhead: $1.50 per unit Offer from Alpha Suppliers: ♦ Fixed manufacturing overhead allocated to each component: $2.00 per unit (Note: $150,000 of this overhead would continue to exist even if the component were outsourced) 1. Calculate the total in-house manufacturing cost per component. . • Price per component: $12.00 Quality and specifications match those of the in-house made component 2. Should XYZ Corporation make the component in-house or outsource it to Alpha Suppliers based on cost alone? Support your answer with calculations. 3. If XYZ Corporation's management has a goal of cutting fixed overheads by 10% in the next financial year, how might this impact the outsourcing decision? 4. What non-financial factors should XYZ Corporation consider before making a decision? XYZ Corporation manufactures widgets. Each widget goes through the machining and assembly departments. Recently, XYZ Corporation has been approached by Alpha Suppliers, an external company which has offered to supply one of the key components of the widget at a fixed price. XYZ Corporation is considering whether to accept the offer from Alpha Suppliers or to continue making the component in- house. Relevant information: XYZ Corporation's annual requirement for the component: 100,000 units Cost to make the component in-house: • Direct materials: $5.00 per unit • Direct labor (machining): $3.00 per unit • Direct labor (assembly): $2.00 per unit . Variable manufacturing overhead: $1.50 per unit Offer from Alpha Suppliers: ♦ Fixed manufacturing overhead allocated to each component: $2.00 per unit (Note: $150,000 of this overhead would continue to exist even if the component were outsourced) 1. Calculate the total in-house manufacturing cost per component. . • Price per component: $12.00 Quality and specifications match those of the in-house made component 2. Should XYZ Corporation make the component in-house or outsource it to Alpha Suppliers based on cost alone? Support your answer with calculations. 3. If XYZ Corporation's management has a goal of cutting fixed overheads by 10% in the next financial year, how might this impact the outsourcing decision? 4. What non-financial factors should XYZ Corporation consider before making a decision?
Expert Answer:
Answer rating: 100% (QA)
Here is the analysis 1 Total inhouse cost per component Direct materials 500 ... View the full answer
Related Book For
Management Accounting
ISBN: 978-0132570848
6th Canadian edition
Authors: Charles T. Horngren, Gary L. Sundem, William O. Stratton, Phillip Beaulieu
Posted Date:
Students also viewed these accounting questions
-
3. In 1981, JR married then 16-year-old Inka in a civil ceremony solemnized by the Mayor in their hometown. The couple lived together until 2007 when JR confessed to having an affair with Elena. Inka...
-
The Eastclock Corporation (EC) manufactures timing devices that are used in industrial settings. Recently, profits have fallen, and management is seeking your advice as an outside consultant on...
-
The Sommers Company, located in southern Wisconsin, manufactures several types of industrial valves and pipe fittings that are sold to customers in nearby states. Currently, the company is operating...
-
Compare the hoop stress (r,/2) predictions from elasticity with voids given by relation (15.5.18) with the corresponding results from classical theory. Choosing N = 1/2 and L = 2, for the elastic...
-
Distinguish between the internal and external urethral sphincters.
-
Give an example of three financial intermediaries and explain how they act as a bridge between small investors and large capital markets or corporations.
-
Outline the steps in the fraud hypothesis testing approach. What are Type II errors? How does one avoid Type II errors?
-
(Analysis and Classification of Equity Transactions) Penn Company was formed on July 1, 2008. It was authorized to issue 300,000 shares of $10 par value common stock and 100,000 shares of 8% $25 par...
-
. 2. Ricky bought a van for RM100,000 on 1 January 20x2 using cheque. The expected useful life of the van is five years and an estimated residual value of RM5,000. Depreciation is to be calculated...
-
Suppose that Sasha and Jayla both collect data to investigate whether people tend to call heads more often than tails when they are asked to call the result of a coin flip. If Sasha has a smaller...
-
Prepare the adjusting entries for the items above. E3.10 (LO1, 2, 3, 4) The income statement of Bjorn ASA for the month of Julyshows net income of ?1,400 based on Service Revenue ?5,500,Salarie 1...
-
I bought a put with a strike of K-37. The put expires today, and the price of the underlying stock is $37.49 What is the payoff per option (do not multiply by 100)? (Enter your answer in dollars with...
-
Establishing a Culture and Structure for the Future (2-3 pages) What training programs must be in place, and will they be conducted by internal or external providers? How can performance reviews be...
-
St. Andrew Craft Dealers is a manufacturing company that produces a single product. At the end of January 2010 the company had closing stock of 5,000 units. The following information was taken from...
-
Answer the following: Formulate a prediction question that you want to answer by applying regression modeling. Examples: Prediction Question: How accurately can I predict the price of a house given...
-
For your Case Study, you will create a visual-based presentation to document the origins of the barriers that are erected between cultures and the actions taken to tear them down. The focus of a case...
-
i) (sin x) = log(x + y) - tan (3x)
-
During registration at Tech every quarter, students in the Department of Management must have their courses approved by the departmental advisor. It takes the advisor an average of 4 minutes...
-
Winnipeg Wholesale Distributors uses an activity-based costing system to determine the cost of handling its products. One important activity is the receiving of shipments in the warehouse. Three...
-
A consulting firm, TAC, is decentralized with 25 offices around the country. The headquarters is based in Vancouver. Another operating division is located in Calgary. A printing subsidiary operation,...
-
Absorption costing regards more categories of costs as product costs. Explain. Be specific.
-
A symmetric matrix is one for which the transpose of the matrix is the same as the original matrix, \(A^{T}=A\). An antisymmetric matrix is one that satisfies \(A^{T}=-A\). a. Show that the diagonal...
-
Consider the matrix representations for two-dimensional rotations of vectors by angles \(\alpha\) and \(\beta\), denoted by \(R_{\alpha}\) and \(R_{\beta}\), respectively. a. Find \(R_{\alpha}^{-1}\)...
-
Consider the matrix \[A=\left(\begin{array}{ccc} \frac{1}{2} & \frac{1}{\sqrt{2}} & \frac{1}{2} \\ -\frac{1}{\sqrt{2}} & 0 & \frac{1}{\sqrt{2}} \\ \frac{1}{2} & -\frac{1}{\sqrt{2}} & \frac{1}{2}...
Study smarter with the SolutionInn App