Zee-Drive Ltd. is a computer manufacturer. One of the items they make is monitor
ID: 2473240 • Letter: Z
Question
Zee-Drive Ltd. is a computer manufacturer. One of the items they make is monitors. Zee-Drive has the opportunity to purchase 18,100 monitors from an outside supplier for $203 per unit. One of the company's cost-accounting interns prepared the following schedule of Zee-Drive's cost to produce 18,100 monitors:
I'm Missing The total cost for second and thid column & cost of purchase and difference of fixed manufacturing overhead. Please Help!
Zee-Drive Ltd. is a computer manufacturer. One of the items they make is monitors. Zee-Drive has the opportunity to purchase 18,100 monitors from an outside supplier for $203 per unit. One of the company's cost-accounting interns prepared the following schedule of Zee-Drive's cost to produce 18,100 monitors: Total cost of producing 18,100 monitors Unit cost Direct materials Direct labor Variable factory overhead Fixed manufacturing overhead Fixed non-manufacturing overhead 2,099,600 1,230,800 615,400 452,500 742,100 $5,140,400 $116 68 34 25 $284 You are asked to look over the intern's estimate before the information is shared with members of management who will decide to continue to make the monitors or buy them. The company's controller believes that the estimate may be incorrect because it includes costs that are not relevant. If Zee-Drive buys the monitors, the direct labor force currently employed in producing the monitors will be terminated and there would be no termination costs incurred. There are no materials on hand and no commitments to suppliers to purchase materials, so all materials would need to be purchased to make the monitors. Variable overheads are avoidable if monitors are bought. Fixed manufacturing overhead costs would be reduced by $40,000, but non-manufacturing costs would remain the same if monitors are bought. Fill in the differential analysis. If an amount box does not require an entry, leave it blank or enter "O" Difference costs/(savings) of buying 18,100 monitors Cost of producing 18,100 monitors Cost to purchase 18,100 monitors Direct materials Direct labor Variable factory overhead 2099600 1230800 615400 452500 (2099600) (1230800) (615400) Fixed manufacturing overhead Outside purchase costs 3674300 3674300 Total costs 4398300Explanation / Answer
The relevant fixed manufacturing overhead will be the avoidable overhead cost only that is $40000.
Cost elements Cost of producing 18100 monitors cost to purchase 18100 monitors Difference costs/(saving) of buiying the monitors Direct materials 2099600 -2099600.00 Direct labours 1230800 -1230800 Variable factory Overhead 615400 -615400 Fixed Manufacturing Overhead 40000 -40000 Outside Purchase Costs 3674300 3674300 Excess of saving over buying -311500Related Questions
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