Kando Company currently pays $14 per unit to buy a part for a product it manufactures. Instead, Kando could make the part for per unit costs of $6 for direct materials, $4 for direct labor, and $2 for incremental overhead. Kando normally applies overhead costs using a predetermined rate of 200% of direct labor cost. (a) Prepare a make or buy analysis of costs for this part. (b) Should Kando make or buy the part? Make Buy Direct materials Direct labor Overhead Cost to buy Cost per unit Company should:
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- The following product costs are available for Stellis Company on the production of erasers: direct materials, $22,000; direct labor, $35,000; manufacturing overhead, $17,500; selling expenses, $17,600; and administrative expenses; $13,400. What are the prime costs? What are the conversion costs? What is the total product cost? What is the total period cost? If 13,750 equivalent units are produced, what is the equivalent material cost per unit? If 17,500 equivalent units are produced, what is the equivalent conversion cost per unit?Bobcat uses a traditional cost system and estimates next years overhead will be $800.000, as driven by the estimated 25,000 direct labor hours. It manufactures three products and estimates the following costs: If the labor rate is $30 per hour, what is the per-unit cost of each product?Brees, Inc., a manufacturer of golf carts, has just received an offer from a supplier to provide 2,600 units of a component used in its main product. The component is a track assembly that is currently produced internally. The supplier has offered to sell the track assembly for 66 per unit. Brees is currently using a traditional, unit-based costing system that assigns overhead to jobs on the basis of direct labor hours. The estimated traditional full cost of producing the track assembly is as follows: Prior to making a decision, the companys CEO commissioned a special study to see whether there would be any decrease in the fixed overhead costs. The results of the study revealed the following: 3 setups1,160 each (The setups would be avoided, and total spending could be reduced by 1,160 per setup.) One half-time inspector is needed. The company already uses part-time inspectors hired through a temporary employment agency. The yearly cost of the part-time inspectors for the track assembly operation is 12,300 and could be totally avoided if the part were purchased. Engineering work: 470 hours, 45/hour. (Although the work decreases by 470 hours, the engineer assigned to the track assembly line also spends time on other products, and there would be no reduction in his salary.) 75 fewer material moves at 30 per move. Required: 1. Ignore the special study, and determine whether the track assembly should be produced internally or purchased from the supplier. 2. Now, using the special study data, repeat the analysis. 3. Discuss the qualitative factors that would affect the decision, including strategic implications. 4. After reviewing the special study, the controller made the following remark: This study ignores the additional activity demands that purchasing would cause. For example, although the demand for inspecting the part on the production floor decreases, we may need to inspect the incoming parts in the receiving area. Will we actually save any inspection costs? Is the controller right?
- Xia Co. currently buys a component part for $9 per unit. Xia belleves that making the part would require $4.45 per unit of direct materials and $1.05 per unit of direct labor. Xia allocates overhead using a predetermined overhead rate of 220% of direct labor cost. Xia estimates an incremental overhead rate of $0.50 per unit to make the part. 1-a. What are the relevant costs for Xia to make or buy the part? (Round your answers to 2 decimal places.) Make Buy Per Unit 1-b. Should Xia make or buy the part? O Make O BuyHaver Company currently pays an outside supplier $19 per unit for a part for one of its products. Haver is considering two alternative methods of making the part. Method 1 for making the part would require direct materials of $7 per unit, direct labor of $10 per unit, and incremental overhead of $3 per unit. Method 2 for making the part would require direct materials of $7 per unit, direct labor of $4 per unit, and incremental overhead of $7 per unit. Compute the cost per unit for each alternative method of making the partHaver Company currently pays an outside supplier $33 per unit for a part for one of its products. Haver is considering two alternative methods of making the part. Method 1 for making the part would require direct materials of $14 per unit, direct labor of $17 per unit, and incremental overhead of $3 per unit. Method 2 for making the part would require direct materials of $14 per unit, direct labor of $11 per unit, and incremental overhead of $7 per unit. Required: 1. Compute the cost per unit for each alternative method of making the part. 2. Should Haver make or buy the part? If Haver makes the part, which production method should it use? Complete this question by entering your answers in the tabs below. Required 1 Required 2 Compute the cost per unit for each alternative method of making the part. Cost per unit Make with Method 1 Make with Method 2 Cost per unit $ 0 Required 1 $ 0 $ Buy Required 2 >
- (a) Prepare a make of buy uhury Gelb Co. currently makes a key part for its main product. Making this part incurs per unit variable costs of $1.20 for direct materials and $0.75 for direct labor. Incremental overhead to make this part is $1.40 per unit. The company can buy the part for $3.50 per unit, (a) Prepare a make or buy analysis of costs for this (b) Should Gelb make or buy the part? part. Exercise 23-2 Make or buy P1Factor Company estimates that producing a unit of product would require $8 per unit of direct materials and $24 per unit of direct labor. Factor Company normally applies overhead using a predetermined overhead rate of 150% of direct labor cost. Factor Company estimates incremental overhead of $16 per unit of product. An outside supplier offers to provide Factor Company with all the units it needs at a price of $46 per unit. Factor Company should choose to: Multiple Choice O O O Buy since the relevant cost to make it is $56. Make since the relevant cost to make it is $48. Buy since the relevant cost to make it is $48. Make since the relevant cost to make it is $32. Buy since the relevant cost to make it is $32.Haver Company currently pays an outside supplier $35 per unit for a part for one of its products. Haver is considering two alternative methods of making the part. Method 1 for making the part would require direct materials of $15 per unit, direct labor of $18 per unit, and incremental overhead of $3 per unit. Method 2 for making the part would require direct materials of $15 per unit, direct labor of $12 per unit, and incremental overhead of $7 per unit. Required: 1. Compute the cost per unit for each alternative method of making the part. 2. Should Haver make or buy the part? If Haver makes the part, which production method should it use? Complete this question by entering your answers in the tabs below. Required 1 Required 2 Should Haver make or buy the part? If Haver makes the part, which production method should it use? Should Haver make or buy the part? If Haver makes the part, which production method should it use?
- Cantrall Company is trying to decide which product to manufacture. Expected direct materials costs are $4.00 per unit for each product. The expected direct labor costs are $2.00 per unit for one product and $4.00 per unit for another product. In choosing between the two products, the direct materials costs are A) relevant; irrelevant B) irrelevant; relevant C) relevant; relevant D) irrelevant; irrelevant and the direct labor costs areThe following standard costs pertain to a component part manufactured by Ashby Company: Direct materials=$ 2 Direct labor=$5 Factory overhead=20 Standard cost per unit=$27 Factory overhead is applied at $1 per standard machine hour. Fixed capacity cost is 60% of applied factory overhead, and is not affected by a "make or buy" decision. It would cost $25 per unit to buy the part from an outside supplier. In the decision to "make or buy," what is the total relevant unit manufacturing cost to be considered? $ ________The following standard costs pertain to a component part manufactured: Direct materials=$ 2 Direct labor=$5 Factory overhead=20 Standard cost per unit=$27 Factory overhead is applied at $1 per standard machine hour. Fixed capacity cost is 60% of applied factory overhead, and is not affected by a "make or buy" decision. It would cost $25 per unit to buy the part from an outside supplier. In the decision to "make or buy," what is the total relevant unit manufacturing cost to be considered? $ ________