Need the answers and formula for the yellow highlight part. Thank you. Alanco, I

Question

Need the answers and formula for the yellow highlight part. Thank you.

Alanco, Inc. manufactures a variety of products and is currently maunfacturing all of its own component parts An outside supplier has offered to sell one of those components to Alanco. To evaluate this offer, the following information has been gathered relating to the cost of producing the component internally: Direct materials Direct labor Variable manufacturing overhead Fixed manufacturing overhead, traceable* Fixed manufacturing overhead, common but allocated Total cost 4.00 6.00 2.00 5.00 8.00 21.00 Supplier price Units used per year Fixed manufacturing overhead, traceable is composed of two items 12,000 Depreciation of equipment (no resale value) Supervisor salar 30% 70% 1. Assuming the company has no alternative use for the facilities now being used to produce the component, complete the following analysis to determine if the outside supplier's offer should be accepted

Explanation / Answer

**common fixed cost will be incurred under both alternative

**traceable fixed cost -depreciation will be same as it has no resale value

Alanco should makethe component . [total cost to make is lower]

per unit Total Make Buy Make Buy cost of purchasing 21 12000*21=252000 Direct material 4 12000*4=48000 Direct labor 6 12000*6=72000 variable manufacturing overhead 2 24000 fixed manufacturing overhead -traceable 5*.70=3.5 42000 Fixed manufacturing overhead -common 0 0 Total cost 15.5 21 186000 252000

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