Mojave Corporation is considering it Outsourcing production of its umbrella tote

Question

Mojave Corporation is considering it Outsourcing production of its umbrella tote bag included with some of its products....

*** I understand it's a little hard to see my screen. I'm very sorry. I recently dropped my laptop.

my.utrgv.edu Home X e?| ? ezto.mhed ?! ? | |q seorch ited my.utrgv.edu ALGEBRALoginSearch Exarn II Question 32 (of 35) Save & ExtSubmit Time remalning: l06:56 Mohave Corp. is considering outsourcing production of the umbrella tote bag included with some of its products. The company has received a bid from a supplier in Vietnam to produce 9,900 units per year for $10.00 each. Mohave has the following information about the cost of producing tote bags Direct materials Direct labor Variable manufacturing overhead Fixed manufacturing overhead 2.00 S11.00 Total cost per unit Mohave has determined that all variable costs could be eliminated by outsourcing the tote bags, while 75 percent of the fixed overhead cost is unavoidable. At this time Mohave has no specific use in mind for the space currently dedicated to producing the tote bags Required 1. Compute the difference in cost between making and buying the umbrela tote bag Differential Cost of Making Versus Buying

Explanation / Answer

DIFFERENTIAL ANALYSIS MAKE BUY DIFFERENTIAL COST Variable ccost: Direct material 59400 59400 labour 19800 19800 Variable manufacturing OH 9900 9900 Fixed OH 19800 14850 4950 Cost of Supplier 99000 -99000 Total cost 108900 113850 -4950 Req b: Hence, The firm shall MAKE the component. Req C: Loss due to ddifferential cost in buying -4950 Additional contribution earned from idle capacity 6000 Net incremental income 1050 Req D: Yes, now Mohave shall BUY thte component.

Related Questions

Navigate

• Browse (All)
• Browse M
• Subjects

---

---

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