Vintech Manufacturing incurs unit costs of $8 ($5 variable and $3 fixed) in maki
ID: 2452279 • Letter: V
Question
Vintech Manufacturing incurs unit costs of $8 ($5 variable and $3 fixed) in making a subassembly part for its finished product. A supplier offers to make 14,100 of the part at $6.10 per unit. If the offer is accepted, Vintech will save all variable costs but no fixed costs.
Prepare an analysis showing the total cost saving, if any, Vintech will realize by buying the part. (If an amount reduces the net income for Increase (Decrease) column then enter with a negative sign preceding the number e.g. -15,000 or parenthesis, e.g. (15,000). Enter all other amounts in all other columns as positive and subtract where necessary.)
Explanation / Answer
The total annual cost has increased in purchasing the subassembly part,so the decision should be to make than buy the parts of the finished goods.
The decision should be to make.
Make Buy Net Income Increase(Decrease) Variable Manufacturing COst 14100x5 =70500 nil 70500 Fixed MAnufacturing Cost 14100x3 =42300 42300 Purchase Price nil 86010 (86010) Total Annual Cost (15510)Related Questions
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