Question

Complete the following two parts. Your responses to both Part 1 and 2 should total 2 to 3 double-spaced pages in Microsoft Word, using 12-point font. Follow APA style for citations and references. Part 1 Consider the following scenario: Central Manufacturing Company needs 20,000 units of a certain part to use in its production cycle. The following information is available: Cost to Central to make the part: Direct materials â $4.00. Direct labor â $16.00. Variable factory overhead â $15.00. Fixed factory overhead applied â $8.00. Total â $43.00. Cost to buy the part from Northern Company: $39.00. If Central buys the part from Northern instead of making it, Central could not use the released facilities in another manufacturing activity. Eighty percent of the fixed factory overhead applied will continue regardless of what decision Central makes. Assess this situation, and write a response in which you address the following: In deciding whether to make or buy the part, what are the total relevant costs per unit to make the part? Direct materials. Direct labor. Variable overhead. Fixed overhead. Total. What decision should Central make? Why? Part 2 Evaluate variable costing by addressing each of the following: What are the advantages and disadvantage of using variable costing? What is absorption costing? How it is possible, under absorption costing, to increase net income by producing more goods? Which costing method is allowed for external financial reporting? Why only this method? Explain. How is a contribution margin determined? Why is it important to management?

Answer 1

Answer to first paty as per policy