Henry Horticultural, Ltd., is a leading producer of greenhouse irrigation system

Question

Henry Horticultural, Ltd., is a leading producer of greenhouse irrigation systems. Currently, the company manufactures the timer unit used in each of its systems. Based on an annual production of 40,910 timers, the company has calculated the following unit costs. Direct fixed costs include supervisory and clerical salaries and equipment depreciation. $11 Direct materials Direct labor Variable manufacturing overhead Direct fixed manufacturing overhead 4 9 (30% salaries, 70% depreciation) Allocated fixed manufacturing overhead 2 Total unit cost $38 Talbert Time Pieces has offered to provide the timer units to Henry at a price of $35 per unit. If Henry accepts the offer, the current timer unit supervisory and clerical staff will be laid off. ? (a1) Your answer is correct. Calculate the total relevant cost to make or buy the timer units. (Round answers to O decimal places, e.g. 5,275.) Make Buy Total relevant cost 1,010,477 1,431,850 SHOW SOLUTION SHOW ANSWER

Explanation / Answer

Requirement a1

Requirement b1

Calculation of total relevent cost of making Direct Material $11.00 Direct Labour $7.00 Variable Manufacturing overhead $4.00 Direct Fixed Cost $2.70 Total Relevent cost per unit $24.70 Total relevent of making 40,910 units $10,10,477 Total Relevent cost of buying 40,910 units $14,31,850

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