PLEASE SHOW SOLUTIONS. Exercise 8-8 The Pronghorn Company manufactures 1,268 uni

Question

PLEASE SHOW SOLUTIONS.

Exercise 8-8 The Pronghorn Company manufactures 1,268 units of a part that could be purchased from an outside supplier for $14 each. Pronghorn's costs to manufacture each part are as follows: $3 Direct materials Direct labor Variable manufacturing overhead Fixed manufacturing overhead 3 Total $17 All fixed overhead is unavoidable and is allocated based on direct labor. The facilities that are used to manufacture the part have no alternative uses (a) Calculate relevant cost to make. Relevent cost to make $ per unit (b) Should Pronghorn continue to manufacture the part? LINK TO TEXT LINK TO VIDEO VIDEO: SIMILAR EXERCISE (c) Calculate net cost to buy if Pronghorn leases the manufacturing facilities to another company for 57,810 per year. Net cost to buy $ (d) Would your answer change If Pronghorn could lease the manufacturing facilities to another company for $7,810 per year? Click i you would like to Show Work for this question: Qpen show Work

Explanation / Answer

a)

b)

Company should continue to make the product. so they can save USD 6,340 ($27,896-$21,556)

c)

d) after leasing, company can buy product instead of maek. so they can save $1,470 ($21,556-$20,086)

Make Direct material $          3 Direct labour $          3 Variable manufacturing overhead $          2 Fixed manufacturing overhead $          8 Relevent cost to make per unt $        16

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