the contol MSI is considering outsourcing the production of the handheld control
ID: 2510725 • Letter: T
Question
the contol MSI is considering outsourcing the production of the handheld control module used wth some of its products. The company has received a bid from Monte Legend Co. (MLC) to produce 26,000 units of the module per year for $35.00 each. The folowing information pertains to MSI's producion of the contro modules: products. The Direct materials Direct labor Variable manufacturing ovemead 4 Fixed manufacturing overhead Total cost per unit $20 10 MSI has determined that it could elim ate all va able costs the control modules were produced exte alty, but none o the xed overhead 3 avoidable. At this ime. MSI has no spec c use in mind or the space that cumenty ded cated to the co trol module production. Required: 1. Compute the difference in cost between making and buying the control module 2. Should 2. Should MSI buy the modules from MLC or contnue to make them? Make 3-a Suppose that the MSI space currenty used to the modules could be utlized by ? new product lhe that would generate $46,000 in annual pront. Recompute ne that would generate dn rence in cost between making and buying under this scenario. cat betweenExplanation / Answer
a) Compute differential cost :
Difference in cost = 884000-910000 = 26000
b) Company should make the product
c) Compute differential cost :
Difference in cost = 930000-910000 = 20000
Make Buy Direct material 520000 Direct labour 260000 Variable manufacturing overhead 104000 Purchase cost 910000 Total 884000 910000Related Questions
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.