$ - Cans Inc. is considering purchasing component YY instead if producing it in-
ID: 2420447 • Letter: #
Question
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Cans Inc. is considering purchasing component YY instead if producing it in-house. Component YY can be purchased for $207. The following cost information pertains to the production of component YY. Cans Inc. uses 75,000 compenents per year. Direct Materials $100.80 Direct Labor (10 minutes per part) ($18 per hour) $3 Variable OH $4.60 Fixed OH $234,000 Depreciation $32,420 Prepare an incremental analysis to determine if component YY should continue to be produced in-house or purchased from an outside vendor. Make Buy Difference Direct Materials 0 Direct Labor 0 VOH 0 Purchase Price 0 Total Cost $ - $ -$
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Explanation / Answer
Statement Showing Incremental Analysis
Since the Purchase Price is more than In house cost by $ 98.6 per component, so the component shall be produced instead of being purchased
Note: Fixed Overheads and depreciation are not considered because these cost will continue to incur irrespective of inhouse production or purchase decision
Particulars Make ($) Buy ($) Difference ($) Direct Material 100.80 0 100.80 Direct Labor 3 0 3 Variable O/H 4.60 0 4.60 Total 108.40 0 108.40 Purchase Price 0 207 207Related Questions
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