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icang [17]
3 years ago
11

Currently, you make one of the components needed for final assembly of your product and you are considering buying the part from

an outside supplier. You currently make the part on equipment that you have had for a number of years (but still runs fine) at a cost of $75,000 per year and a variable cost of $25.00 pre unit. The outside supplier that you found can make the part for $17.00 per unit, but you will have to pay some of their annual fixed costs of $220,000.
Required:
1. What is the break-even quantity (or indifference point) between buying and making? (Calculate by hand or all in Excel?)
2. What is the total cost to make a quantity of 28,000 units per year?
3. What is the total cost to buy a quantity of 28,000 units per year?
4. What does the company save for the year by selecting the low-cost option at an annual requirement of 28,000 units?
Business
1 answer:
VashaNatasha [74]3 years ago
6 0

Answer:

1. Break even quantity is 18,125 units

2. Cost to make 28,000 units = $ 775,000

3. Total costs to buy 28,000 units = $ 696,000

4. Savings by using low cost option ( buy from outside) $ 79,000

Explanation:

Computation of Break even point

Variable cost to make equipment in house                $ 25 per unit

Cost to purchase the unit from outside                       <u>$ 17 per unit</u>

Differential Cost per unit                                               <u>$ 8 per unit</u>

Fixed costs to be paid to outside supplier                  $ 220,000

Fixed costs to  be incurred in house                            <u>$  75,000</u>          

Incremental fixed costs                                                 $ 145,000

Break even point - Differential in fixed costs / Differential cost per  unit

$ 145,000/ $ 8 =                                                            18,125 units      

Computation of costs to make 28,000 units

Variable costs per unit -  $ 25 per unit

Units to be produced   -  28,000 units

Total Variable costs  $ 25 * 28,000 units                   $ 700,000

Fixed costs                                                                     $ <u> 75,000</u>

Total costs to make 28,000 units                               $ 775,000      

                               

Computation of costs to buy 28,000 units

Variable costs per unit -  $ 17 per unit

Units to be produced   -  28,000 units

Total Variable costs  $ 17 * 28,000 units                    $  476,000

Fixed costs                                                                    $  <u>220,000</u>

Total costs to make 28,000 units                              $ 696,000  

Computation of savings

Buying 28,000 units                                                    $ 775,000

Making 28,000 units                                                   <u>$ 696,000</u>

Savings from buying from outside                              $ 79,000                                

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Volgvan

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Conceptual skills are vital for top managers, less critical for mid-degree managers and no longer required for first-stage managers. As we move from the bottom of the managerial hierarchy to the pinnacle, the significance of these capabilities will upward thrust. Professional first-line managers can pay attention, talk, and write truely and continually, speaking for maximum effect with people at all degrees inside the organization, including team members, superiors, friends, and others. it is specifically important to correctly speak desires and expectations.technical abilities are the most vital for lower level managers because the managers surpervise the workers who produce products or serve clients. Group leaders and first-line managers want technical understanding and competencies to train new employees and help employees remedy problems. Pinnacle managers need sturdy conceptual abilities, whilst the ones at midlevels need top interpersonal abilities and those at lower stages want technical abilities. All managers want robust communication, selection-making, and time-management skills.

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Off - invoice allowance

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Answer:

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Explanation:

Using the two stage growth model of dividend discount model, we can calculate the price of the stock today. The DDM values a stock based on the present value of the expected future dividends from the stock. The formula to calculate the price of the stock today is,

P0 = D0 * (1+g1) / (1+r)  +  D0 * (1+g1)^2 / (1+r)^2  +  ...  +  D0 * (1+g1)^n / (1+r)^n  +  [(D0 * (1+g1)^n * (1+g2) / (r - g2)) / (1+r)^n]

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