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2 years ago

Zion Manufacturing had always made its components in-house.

Business

1 answer:

OverLord2011 [107]2 years ago

7 0

Answer:

1. Alternative 1 = Produce Component K2 in-house and Alternative 2 = Purchase Component K2 from Bryce Component Works

Alternative 1 = Produce Component K2 in-house

Direct materials ($7.53 × 4,700 units) = $35,391

Direct labor ($2.29 × 4,700 units) = $10,763

Variable overhead ($1.96 × 4,700 units) = $ 9,212

Total Cost = $55,366

Alternative 2 =Purchase Component K2 from Bryce Component Works

Purchase Cost ($12 × 4,700 units) = $56,400

Total Cost = $56,400

If Zion decides to purchase the component from Bryce:

Incremental Costs = $56,400 - $55,366 = $ 1,034

Therefore, A Decrease in Operating Income of $ 1,034

Alternative 1 = Produce Component K2 in-house and Alternative

(It is cheaper to produce the component in-house than to purchase it)

Explanation:

Fixed Cost will be incurred in both alternatives, therefore they are irrelevant for this decision.

Choose the option that gives a lower cost. In this case Alternative 1 gives a lower cost.

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2 years ago

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communication

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2 years ago

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Answer:

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3 years ago

Why are costs and benefits weighed when determining whether something gets produced

katrin2010 [14]

Answer:

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Explanation:

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