To Make or Not to Make

Case Study Answer Sheet

Questions 1 and 2

Categorize the costs detailed in the case, such as sunk, opportunity, variable,direct materials, direct labor, and overhead. Based on relevant costing principles, which are relevant for each of the respective projects? Please type answers in the table

Cost	Classification	Relevance
Table saw, planer, jointer, dust collection system, mall tools	Sunk Costs	Not relevant
Small materials (glue, sandpaper, conditioning oil, wax)	Variable Costs, Direct Materials	Relevant
Cost of wood on hand	Sunk Costs	Not Relevant
Current market cost of wood	Variable Costs, Direct Materials	Relevant
Alternative use/scrap value of wood	Opportunity Costs	Relevant
Hourly rate for neighbor if this option is chosen	Variable Costs, direct materials	Relevant
Hourly rate for Amish workshop if this option is chosen	Variable costs, direct labor	Relevant
New drum sander if this option is chosen	Variable costs, overhead	Relevant
Loss of profit on headboards and/or cutting boards if only one is chosen	Opportunity costs	Relevant
Insurance - not mentioned but perhaps needed if neighbor works for Adam	Overhead	Relevant
Utilities	Overhead	relevant

Question 3

Is there any additional information you need from Adam before you can help him decide whetherhe should complete both projects? If so, please specify.