PROBLEM 19.45 (40 minutes) Outsourcing decision; relevant costs; ethics: manufacturer
1. (a) An analysis of the relevant costs that shows whether the Victorian Division of HMC should make JY-65 or purchase it from Marley Company is as follows:
Amount
per unit
Total for
32 000 units
Cost to purchase JY-65 from Marley:
Bid price from Marley
$8.65
276 800
Equipment lease penalty ($18 000/12) 2
3 000
Total cost to purchase
$279 800
Cost for Victorian to make JY-65:
Direct material ($97 500/30 000) 1.08
$3.51
$112 320
Direct labour ($60 000/30 000) 1.05
2.10
67 200
Variable manufacturing overhead ($112 500 .4)/30 000
1.50
48 000
Factory space rental
42 000
Equipment leasing costs
18 000
Total cost to make
$287 520
Cost savings if purchased from Marley
$ (7 720)
(b) Based solely on the financial results, the 32 000 units of JY-65......
Join Now or Login to view the rest of this paper.
Approximate Word Count: 754
Approximate Pages: 3 (260 words per double-spaced page) |