EXERCISE #9-Diferencial Analisis Total Security Company manufacturers home alarm

Question

EXERCISE #9-Diferencial Analisis Total Security Company manufacturers home alarms. It currently manufactures one of its components with a total cost of $58, which includes fixed costs from $19 per unit. An external provider of this component has offered to sell him to Total Security component for $59 Instructions: Provide a differential analysis of the external purchase proposal. EXERCISE #10-Differential analysis of income or loss Division C of Bross Company posted sales of $352,050, variable cost of goods sold of $311,040, variable costs of $12,550 and fixed costs of $61,000 for sale; creating a loss from operations of $29,000 INSTRUCTIONS: (A) Determine the differential of income or loss of sales from Division C. (B) This division should be discontinued?

Explanation / Answer

9 Variable manufacturing cost = 58-19 = $39 Per unit Make Buy Variable manufacturing cost 39 Purchase cost 59 Total relevant cost 39 59 As the cost to buy is more than relevant cost to make, it is advisable to reject the external purchase proposal 10 A Sales 352050 Less: Variable costs Cost of goods sold 311040 Costs of sales 12550 Total Variable costs 323590 Differential income from Division C 28460 B The Division C should not be discontinued

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