question archive The management of Shatner Manufacturing Company is trying to decide whether to continuemanufacturing a part or to buy it from an outside supplier
The management of Shatner Manufacturing Company is trying to decide whether to continuemanufacturing a part or to buy it from an outside supplier
Subject:AccountingPrice: Bought3
The management of Shatner Manufacturing Company is trying to decide whether to continuemanufacturing a part or to buy it from an outside supplier. The part, called CISCO, is a component ofthe company’s finished product.The following information was collected from the accounting records and production data for the yearending December 31, 2017.1. 8,100 units of CISCO were produced in the Machining Department.2. Variable manufacturing costs applicable to the production of each CISCO unit were:direct materials $ 4.86 , direct labor $ 4.40 , indirect labor $ 0.48 , utilities $ 0.38 .3. Fixed manufacturing costs applicable to the production of CISCO were:Cost ItemDirectDepreciationAllocated$ 2,000$ 940Property taxes550450Insurance960620$ 3,510$ 2,010All variable manufacturing and direct fixed costs will be eliminated if CISCO is purchased. Allocatedcosts will have to be absorbed by other production departments.4. The lowest quotation for 8,100 CISCO units from a supplier is $ 82,656 .5. If CISCO units are purchased, freight and inspection costs would be $ 0.36 per unit, and receivingcosts totaling $ 1,260 per year would be incurred by the Machining Department.(a) Prepare an incremental analysis for CISCO. (Enter negative amounts using either a negativesign preceding the number e.g. -45 or parentheses e.g. (45).)Make CISCO$Buy CISCO$Net IncomeIncrease(Decrease)$Direct materialDirect laborIndirect laborUtilities3936603936635640035640388803888307803078082656(82656)DepreciationProperty taxesInsurancePurchase priceFreight and inspectionReceiving costs029162916012601260$Total annual cost$$
