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In: Accounting

Lindon Company uses 4,000 units of Part X each year as a component in the assembly...

Lindon Company uses 4,000 units of Part X each year as a component in the assembly of one of its products. The company is presently producing Part X internally at a total cost of $54,000 as follows:

Direct Materials $11,000
Direct Labor 13,000
Variable Manufacturing Overhead 10,000
Fixed Manufacturing Overhead 20,000
Total Costs $54,000

An outside supplier has offered to provide Part X at a price of $11.50 per unit. If Lindon Company stops producing the part internally, one-fourth of the fixed manufacturing overhead would be eliminated.

INSTRUCTIONS Prepare an analysis showing the annual advantage or disadvantage of accepting the outside supplier's offer. When complete, answer each of the following by selecting the correct match from the list provided.

What is the total outside purchase price for the 4,000 units?
  

What is the unit cost of direct materials?

What is the unit cost of direct labor?

What is the unit cost of variable manufacturing overhead?
  

What is the unit cost of fixed manufacturing overhead?
      -   

What amount of the fixed manufacturing overhead is avoidable?

What is the total relevant cost to make the needed units?
      -   

Is there an advantage to making or to buying the needed units?
      - I.   

What is the amount of the advantage to making or to buying the needed units?
A.

$5.00
B.

$5,000
C.

$3.25
D.

$2.75
E.

$46,000
F.

Advantage - Making
G.

$39,000
H.

$7,000
I.

$2.50

Solutions

Expert Solution

ekkarill92 answered 1 year ago
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