Recher Corporation uses part Q89 in one of its products. The company\'s Accounti

Question

Recher Corporation uses part Q89 in one of its products. The company's Accounting Department reports the following costs of producing the 8,300 units of the part that are needed every year. Direct materials Direct labor Variable overhead Supervisor's salary Depreciation of special equipment Allocated general overhead Per Unit $8.60 $ 4.80 $9.50 $3.60 $3.00 $1.60 An outside supplier has offered to make the part and sell it to the company for $30.00 each. If this offer is accepted, the supervisor's salary and all of the variable costs, including direct labor, can be avoided. The special equipment used to make the part was purchased many years ago and has no salvage value or other use. The allocated general overhead represents fixed costs of the entire company. If the outside supplier's offer were accepted, only $4,600 of these allocated general overhead costs would be avoided. In addition, the space used to produce part Q89 could be used to make more of one of the company's other products, generating an additional segment margin of $14,300 per year for that product. Required: a. Prepare a report that shows the financial impact of buying part Q89 from the supplier rather than continuing to make it inside the company b. Which alternative should the company choose? Complete this question by entering your answers in the tabs below. Required ARequired B Prepare a report that shows the financial impact of buying part Q89 from the supplier rather than continuing to make it inside the company Make Direct materials Direct labor Variable overhead Supervisor's salary Depreciation of special equipment Allocated general overhead Outside purchase price Opportunity cost Total cost s 71,380 39,840 78,850 29,880 24,900 13,280 24,900 8,680 Required A Required B

Explanation / Answer

1 Make Buy Direct material 71380 Direct labor 39840 Variable overheads 78850 Supervisor's salary 29880 Depreciation of special equipment 24900 24900 Allocated general overheads 13280 8680 Outside purchase price 249000 Opportunity cost 14300 Total cost 272430 282580 2 total cost of make alternative is less by 10150 company should make instead of buy

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