Answer:
The answer is: a
Explanation:
The Parton Company has a 'make or buy' decision. This decision involves analysing the incremental costs associated with each option. Incremental costs are costs incurred as a result of producing one more unit of a product. If the excess capacity can be utilised to produce the headlights at a lower cost than the cost of acquiring the headlights from an external supplier, then the company should produce the headlights.
The Parton Company incurs $12.80 per headlight purchased from the external supplier. Added to this cost, are the existing costs of operating below plant capacity. If making the headlights in the manufacturing plant yields a positive contribution to fixed costs, then the Parton company should produce the headlights in the manufacturing plant.
By producing the headlights, the Parton company gains a contribution to fixed costs of $1.03 per headlight.
Foregone purchase costs from supplier: $12.80
Incurred costs (directly) from production: ($11.77)
Direct materials ($4.45)
Direct Labour ($3.45)
Manufacturing Overheads: $(6.45*0.6) <u>($3.87)</u>
Net gain per headlight <u> </u><u>$1.03</u>
Answer:
TRUE
Explanation:
Strategic planning is an essential tool for any company, regardless of its size or area of activity, through it the company identifies what its objectives and goals are for a period of time and develops action plans to achieve them. Through strategic planning, the company also seeks to identify its mission, vision, values, policies and procedures that will assist it in reaching its goals.
To be effective, it must be aligned with the organizational identity, be properly implemented and monitored.
Missing information:
Corporation makes 5,700 units of part U13 each year. This part is used in one of the company's products. The company's Accounting Department reports the following costs of producing the part at this level of activity: Per Unit Direct materials $9.60 Direct labor $7.80 Variable manufacturing overhead $10.20 Supervisor's salary $5.90 Depreciation of special equipment $8.80 Allocated general overhead $8.00 An outside supplier has offered to make and sell the part to the company for $25.10 each.
Answer:
annual financial advantage of purchasing part from outside vendor = $73,380
Explanation:
current production costs per unit:
- direct materials $9.60
- direct labor $7.80
- variable manufacturing overhead $10.20
- supervisor's salary $5.90
- depreciation of special equipment $8.80
- allocated general overhead (fixed) $8.00
- total current costs per unit = $50.30
- total costs $50.30 x 5,700 units = $286,710
costs if company decides to purchase the part form outside vendor:
- purchase cost per unit $25.10
- deprecation of special equipment $8.80
- allocated general overhead $8.00
- total costs per unit = $41.90
- total costs $41.90 x 5,700 = $238,830
- - revenue generated from using facility space = $238,830 - $25,500 = $213,330
annual financial advantage of purchasing part from outside vendor = $286,710 - $213,330 = $73,380
