Ask Question, Ask an Expert

+1-415-315-9853

info@mywordsolution.com

Ask Cost Accounting Expert

problem 1: One of the divisions in Acme Manufacturing Company is presently negotiating with the other supplier regarding outsourcing component A that it manufactures. The division presently manufactures 10,000 units per annum of the component. The costs presently assigned to the components are as shown below:

                                                               Total costs of Producing 10,000
                                                                        Components (Rs)
Direct materials                                                   120,000
Direct labor                                                         100,000
Variable manufacturing overhead costs                  10,000
Fixed manufacturing overhead costs                      80,000
Share of non-manufacturing overheads                  50,000
Total costs                                                         360,000

The above costs are expected to remain unchanged in the foreseeable future if the Acme Manufacturing Company continues to manufacture the components. A supplier has offered to supply 10,000 components per annum at a price of Rs 30 per unit guaranteed for a minimum of three years.

If Acme Manufacturing Company outsources component A, the direct labor force presently employed in producing the components will be made redundant. No redundancy costs will be incurred. Direct materials and variable overheads are avoidable if component A is outsourced. Fixed manufacturing overhead costs would be decreased by Rs 10,000 per annum however non-manufacturing costs would remain unchanged. Suppose initially that the capacity that is needed for component A has no alternative use.

Required: Should the Division of Acme Manufacturing Company make or purchase the component?

problem 2: Suppose now that the extra capacity which will be made available from outsourcing component A can be used to manufacture and sell 10,000 units of part B at a price of Rs 34 per unit. All of the labor force needed to manufacture component A would be used to make part B. The variable manufacturing overhead, the fixed manufacturing overheads and the non-manufacturing overheads would be similar as the cost incurred for manufacturing component A. The materials needed to manufacture component A would not be needed however additional materials needed for making part B would cost Rs 13 per unit.

Required: Should Acme Manufacturing Company outsource the component A?

problem 3: What are the other non-financial factors which require to be considered before taking a decision apart from the financial elements?   

Cost Accounting, Accounting

  • Category:- Cost Accounting
  • Reference No.:- M96756

Have any Question? 


Related Questions in Cost Accounting

Case questionsmarriott corporation the cost of capital

Case Questions Marriott Corporation: The Cost of Capital (Abridged) 1. What is the weighted average cost of capital for Marriott Corporation? a. What risk-free rate and risk premium did you use to calculate the cost of e ...

Questionyou are just from attending a conference on

QUESTION You are just from attending a conference on Activity Based Costing (ABC) and you now wish to put your knowledge to practice by applying the principles of ABC to the four products currently made and sold by your ...

Cost accountingquestion 1 which of the following statements

Cost Accounting Question 1. Which of the following statements regarding differential costs is (are) false? (A). The full cost fallacy occurs when a decision-maker fails to include fixed manufacturingoverhead in the produ ...

Polarisreading the case and answer the all question polaris

Polaris Reading the case and answer the all question: Polaris: Suggested assignment questions Why does the Polaris outsource the manufacture of most components but in-source final assembly? Which manufacturing location o ...

Scenario-you seemed to develop significant interest with

Scenario- You seemed to develop significant interest with your talk on the future of cost accounting. Your boss has heard about the excellent presentation and you are hopeful that your early retirement will take place. A ...

Assignmentdolan products is a small family owned audio

Assignment Dolan Products is a small, family owned audio component manufacturer. Several years ago, the company decided to concentrate on only three models, which were sold under many brand names to electronic retailers ...

Assignment discussion-cost accumulation systemwhen

Assignment: Discussion-Cost Accumulation System When companies accumulate costs, they generally use either a job-order or a process costing system. The type of system used often varies based on the type of product or ser ...

Problem 1 master budgetomega inc has developed the

Problem 1: Master Budget Omega, Inc. has developed the following sales forecast for the first six months of the coming year Month Sales (in units) January 30,000 February 50,000 March 70,000 April 80,000 May 60,000 June ...

Assignmentwhile a form of abc was being used by general

Assignment While a form of ABC was being used by General Electric back in the sixties, widespread use of ABC didn't began in the United States until the late eighties. The early focus of ABC was on developing more reliab ...

Question 1pringle company distributes a single product the

Question 1. Pringle Company distributes a single product. The company's sales and expenses for a recent month follow:   Total    Per Unit   Sales $ 300,000   $ 20        Variable expenses   210,000     14          Contri ...

  • 4,153,160 Questions Asked
  • 13,132 Experts
  • 2,558,936 Questions Answered

Ask Experts for help!!

Looking for Assignment Help?

Start excelling in your Courses, Get help with Assignment

Write us your full requirement for evaluation and you will receive response within 20 minutes turnaround time.

Ask Now Help with Problems, Get a Best Answer

Section onea in an atwood machine suppose two objects of

SECTION ONE (a) In an Atwood Machine, suppose two objects of unequal mass are hung vertically over a frictionless

Part 1you work in hr for a company that operates a factory

Part 1: You work in HR for a company that operates a factory manufacturing fiberglass. There are several hundred empl

Details on advanced accounting paperthis paper is intended

DETAILS ON ADVANCED ACCOUNTING PAPER This paper is intended for students to apply the theoretical knowledge around ac

Create a provider database and related reports and queries

Create a provider database and related reports and queries to capture contact information for potential PC component pro

Describe what you learned about the impact of economic

Describe what you learned about the impact of economic, social, and demographic trends affecting the US labor environmen