Exercise 4-46 and 4-47 (LO 4-4) The following information applies to the questio
ID: 2332419 • Letter: E
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Exercise 4-46 and 4-47 (LO 4-4) The following information applies to the questions displsyed below Mel's Meals 2 Go purchases cookies that it includes in the 10,000 box lunches it prepares and sells annually, Mel's kitchen and adjoining meeting room operate at 70 percent of capacity, Mel's purchases the cookies for $070 each but is considering making them instead. Mels can boke each cookie or $0.24 for materials,015 tor direct labor, and SO 3310r overhead without increasing its capacity. The $0.33 or overhead includes an ocation of $0.32 per cookie for fixed overhead. However, total fixed overhead for the company would not increaseMel's makes thecookles Mel himself has come to you for advice. "t would cost me S0.72 to make the cookiles, but only $0.70 to buy. Should I continue buying them?" Materials and labor are variable costs, but varlable overhead would be only $0.17 per cookle. Two cookies are put nto every lunch. Section Break Exereise 4-46 and 4-47 LO 4-4) Required 1.00 points Exercise 4-46 Make-or-Buy Decisions (LO 4-4) Required: a. Prepare a schedule to show the differential costs per cookie. (Round your answers to 2 decimal places. Solect option "higher" or "lower", keoping Status Quo as the base. Seloct "none" if there is no offoct.) Status Alternative Difterence (Buy-Make) Coet to buy Direct material Direc labor Variable cverhead Total costs 000 S 0.00Explanation / Answer
Partiulars Make Buy Difference Variable Expense Direct Material $0.24 $0.00 $0.24 Direct Labour $0.15 $0.00 $0.15 Variable Overhead $0.01 $0.00 $0.01 Purchase Cost $0.00 $0.70 -$0.70 Relevant Cost per Cookies $0.40 $0.70 -$0.30 Hence , it's advisable to Make the Cookies because revant cost to make the cookies is $0.4 /unit and diference in Make any Buy is $0.3/Unit
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