The following infom ato pertains lo MSI\'s production of the cotrol modules fo 5
ID: 2566130 • Letter: T
Question
The following infom ato pertains lo MSI's production of the cotrol modules fo 516 00 each e sproducs e Legend Co. LC to produce 10 000 unts of te module per MSI is co id ng cutsourcrthe production of the handheld control mod e used wth some cf its products The company has recened a bid from M Direct Iabor Fiued manufacturing overheed MSI has no specifc use n mndfor the space that ts cure thy dedicated to the control module production temaly, but none cf the t ed ove teadis avocable Ad hs tr e MSI has determined t at could ei t ate all vatte cos r the control modules were prodced Required: 1. Campute the dierence in cest between maung and buying the contral medule 2ShousSI buy the mooules hom MLC ar contn bo make them? Buy S36 000 arm al prott. Reconote the difference n cost between makingard buying under this scar arso. reduct line that we ad ga wo a-a. Suppose tha e MSI sooce cu ently usedfor the mod les could be utila ed by a no 3.b. Does this chango yourExplanation / Answer
1 Making cost Direct material 9 Direct labor 3 Variable manufacturing cost 3 Total cost 15 Buying cost 16 Difference cost (16 - 15) *10,000 units 10000 2 Better to make as making cost is less than buying cost 3 Buying cost 160000 (16*10000) Less New product profit 36000 Net cost 124000 Making cost 150000 (15*10000) Difference in cost 26000 3b Yes as now buing cost is less than making cost so it is better to buy
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