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i Chrome File Edit View History Bookmarks People Window Help 5%D' Fri 7:43 PM a0E WMU-Central Authentication 0 (25) Gym Class Heroes: As 4- G Low Battery Your Mac will sleep soon unless plugged into a power outlet Close ezto.mheducation.com/hm.tpx MSI is considering outsourcing the production of the handheld control module used with some of its products. The company has received a bid from Monte Legend Co. (MLC) to produce 8,000 unils of the module per year for S18.00 each. The following information pertains to MSI's production of the control modules Direct materials Direct labor Variable manufacturing averhead Fixed manufacturing overhcad Total cost per unit MSI has determined that it could eliminate all variable costs if the control modules were produced extermally, but none of the fixed overhead is avoidable. At this time, MSI has no specific use in mind for the space that is currently dedicated to the control module production. Required: 1. Compute the diference in cost between making and buying the control module 2. Should MSI buy the modules from MLC or continue to make them? Buy Make 3-a. Suppose that the MSI space currently used for the modules could be utilized by a new product line that would generate S40,000 In annual profit Recompute the difference in cost between making and buying under this scenarlo. in Cost 3-b. Does this change your recommendation to MSI? Yes NoExplanation / Answer
1) Calculate difference in cost :
Difference in cost = 144000-136000 = 8000
2) No, MSI should not accept the special order
3) Calculate difference in cost :
Difference in cost = 176000-144000 = 32000
2) Yes, MSI should accept the special order
Make Buy Direct material 72000 Direct labour 48000 Variable overhead 16000 Purchase cost 144000 Total 136000 144000Related Questions
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