Return to Blackboard Accounting for Decision Making for George Mason University,

Question

Return to Blackboard Accounting for Decision Making for George Mason University, le Help I System Announcements Assignment Gradebook ORION ice ment CALCULATOR PRINTER VERSION BACKI Problem 7-2 (Part Level Submission) The management of Flint Manufacturing Company is trying to decide whether to continue manufacturing a part or to buy it from an outside supplier. The part, called CiSco, is a component of the company's finished product The following information was collected from the accounting records and production data for the year ending December 31, 2017 1. 8,100 units of CISCO were produced in the Machining Department 2. Variable manufacturing costs applicable to the production of each CISCO unit were: direct materials $5.10, direct labor $4.89, indirect labor $0.42, utilities $0.35. 3. Fixed manufacturing costs applicable to the production of CISCO were: Cost Item Direct Allocated Depreciation $1,900 $930 470 400 900 640 $3,270$1,970 Property taxes Insurance All variable manufacturing and direct fixed costs will be eliminated if CISCO is purchased. Allocated costs will have to be absorbed by other production departments. 4. The lowest quotation for 8,100 CISCO units from a supplier is $87,328 5. If CISCO units are purchased, freight and inspection costs would be 50.33 per unit, and receiving costs totaling $1,290 per year would be incurred by the Machining Department. v (a) Prepare an incremental analysis for CiSCO. (If amount decreases net income then enter the amount using either a negative sign preceding the number e.g. -45 or parentheses e.g. (45)) Net Income Increase Make CISCO Buy CISCO (Decrease Purert matera 3:48 PM re to search ih 3/21/2018

Explanation / Answer

INCREMENTAL ANALYSIS: MAKE CISCO BUY CISCO Net Income Increase/(decrease) Direct material 41310 41310 Direct Labour 39609 39,609 Indirect labour 3402 3,402 Utilities 2835 2,835 Depreciation 1900 1900 Property taxes 470 470 Insurance 900 900 Purchase price 87328 -87,328 Freight and inspection 3078 -3,078 Receiving cost 1290 -1,290 Total Annual cost 90426 91696 -1,270 Hence, the offer should not be accepted

Related Questions

Navigate

• Browse (All)
• Browse R
• Subjects

---

---

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