Sports Equipment Unlimited makes and sells soccer goals and has sales of 20,000

Question

Sports Equipment Unlimited makes and sells soccer goals and has sales of 20,000 units per year. The plant is operating at full capacity.      
A potential supplier has approached Sports Equipment Unlimited and offered to supply the soccer goals at a finished cost of $31.50      
per goal. If the company buys rather than manufactures, they will be able to eliminate 60% of fixed manufacturing costs by leasing      
unused space. The current costs are as follows:      

      
INSTRUCTIONS:      
Prepare an incremental analysis for the decisions to make or buy the soccer goals.      
Show the cost of continuing to make and to buy the goals. Show the effect on net      
income if they buy. Should Sports Equipment Unlimited buy the goals?      
      

Per Unit Direct Labor 200,000 10.00 Direct Materials 247,000 12.35 Variable Manufacturing Overhead 60,000 3.00 Fixed Manufacturing Overhead 170,000 8.50 Total Manufacturing Cost 677,000 33.85

Explanation / Answer

Per unit variable cost Direct materials 12.35 Variable manufacturing overhead 3 Direct labor    10 Total 25.35 Analysis of offer Fixed manufacturing overhead 102000 Less:incremental cost -123000 (31.5-25.35) net loss -21000 Comment:as there is a net loss of $ 21000 in this option, so it should not be selected.

Related Questions

Navigate

• Browse (All)
• Browse S
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.