Practice Exercise 03 (Part Level Submission) Bruin Manufacturing currently makes

Question

Practice Exercise 03 (Part Level Submission) Bruin Manufacturing currently makes the 20,000 ball bearings it uses each year in its railroad car wheels. There is no other use for these production facilities, nor is there a market for the depreciable items. Raider, Inc., has just submitted a bid to manufacture the ball b Bruin at a price of $22 per bearing. If Bruin no longer makes the ball bearings, the product manager will lose his job. The standard cost card lists the following costs of making one ball bearing: $2 Direct materials Direct labor variable overhead Direct fixed overhead 5 (60% salary of product manager, 40% depreciation) Non differential fixed overhead 14 32 Total cost (a) Calculate the total relevant cost to make and buy the ballbearings. Make Buy Total Cost

Explanation / Answer

At production activity level 20,000, direct fixed overhead inclused salary for production manager is $3 per unit (= $5 x 0.60). Moreover, Bruin has to bear 'Non differential fixed overhead' at $14 per unit at 20,000 level of activity.

  

Make Buy Total cost $32 x 20,000 = $6,40,000 ( Buying cost $22 + Non differential fixed overhead $14) x 20,000 = $7,20,000.

Related Questions

Navigate

• Browse (All)
• Browse P
• Subjects

---

---

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