O ezto mheducation.comm Question 13 jof 19 Save & Ext Sub 061 points Mohave Corp

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O ezto mheducation.comm Question 13 jof 19 Save & Ext Sub 061 points Mohave Corp sconsidering outsouncing production of the umbrella tole big included with some of its products. The company has recelived a bid from a supplier in Vietam to produce 9,700 units per year for $800 each Mohave has the folowing inflornation about the cost of prodicing tote bag Direct labor Mohave has determined that all variable costs could be eliminated by outsourcing the tote bags, while 76 percent of the fooed overhead cost is unavoidable At this time. Monave has speciic use in mind for the space cunenty dedicated to produing the tote bags 1. Compute the difrence in cost between making and buying the umbrella tole b evors Making 2. Should Mohave buy the tole bags or continue to make the? option command command option

Explanation / Answer

1 Cost of making Direct material 4 x 9700 = $             38,800 Direct material 2 x 9700 =                 19,400 Variable manufacturing overhead 1 x 9700 =                   9,700 Fixed manufacturing Overhead 2 x 9700 =                 19,400 Total cost of making $             87,300 Cost of buying Cost of purchasing 8 x 9700 = 77600 Unavoidable Fixed manfacturing overhead 2 x75% x 9700 = 14550 Total cost to buy 92150 Differential cost of making versus buying $                 4,850 Favors making 2 Make 3a Differential cost of making versus buying $              (1,150) Favors buying (92150-6000)-87300 3b Yes Note: If your answer not match then please try to change sign from + to - or - to +

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