Prepare a make or buy analysis. XUS Prepare a make or buy analysis – Excel ?…
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Question “Prepare a make or buy analysis. XUS Prepare a make or buy analysis – Excel ?…”
Prepare a make or buy analysis. XUS Prepare a make or buy analysis – Excel ? – X FILE HOME INSERT PAGE LAYOUT FORMULAS DATA REVIEW VIEW Sign In Calibri -11-AA Paste B IU, L – A Alignment Number Conditional Format as Cell Cells Formatting* Table Styles – Clipboard Font El Styles A1 X for Alanco, Inc. manufactures a variety of products and is currently maunfacturing all A B C D E HI Alanco, Ind. manufactures a variety of products and is currently maunfacturing all of its own component parts. 2 An outside supplier has offered to sell one of those components to Alanco. To evaluate this offer, the following 3 information has been gathered relating to the cost of producing the component internally: $ 6 7 Direct materials Direct labor Variable manufacturing overhead Fixed manufacturing overhead, traceable* Fixed manufacturing overhead, common but allocated Total cost 4.00 6.00 2.00 5.00 8.00 25.00 10 Supplier price $ 21.00
14 Units used per year 12,000 16 *Fixed manufacturing overhead, traceable is composed of two items: Depreciation of equipment (no resale value) Supervisor salary 30% 70% 20 1. Assuming the company has no alternative use for the facilities now being used to produce the 21 component, complete the following analysis to determine if the outside supplier’s offer should be accepted. Per Unit Differential Cost Make Buy 12,000 units Make 26 Cost of purchasing 27 Direct materials 28 Direct labor 29 Variable manufacturing overhead 30 Fixed manufacturing overhead, traceable 31 Fixed manufacturing overhead, common 32 Total costs
Based on this analysis, write an if statement to determine if Alanco should make or buy the component. Alanco should the component
Answer
Sol. :- Alanco Inc. Price per Unit: 12,000 Vuit. Make BUY 1. Cost to Purchase $ 21 $ 252,000 Diret Materials $4 $ 48,000 Labour $ 72,000 Variable Manufacturing Cost $2 $ 24,000 Fixed Manufacturing Cost Overhead $ 3.5 $ 42.000 Fixed Manufacturing Overhead. Common Total Cost $15.5 $ 21 $286,000 $252,000 Difference in favor of make= Cost of buy 12.000 units – Cost of Manufacturing = $ 266,000 – $ 252,000 The component should be made by Alanco Inc. The company should decline the offer to buy from an outside supplier because the cost of manufacturing is more expensive than the cost of buying.
Note: The cost of purchasing is the unit used in a year. deg 12.000 Unit = $ 252,000 Cost Of Direct Material = Unit Produced & Unit Costs of Dired Material = 12000Vu’t x 4 = $48.000 Cost Of Direct Labour = Unit Produced & Cost of labour Fervuit = 12000Vuit X $6 = $72,000 Variable Manufacturing Overhead – Unit Produced & Variable Mfg. Cost pertuit * 12.000 Vuit * $ 2 = 24000 Fixed Manufacturing Overhead Traceable = = ‘uit Custom Fixed mig. Overhead Tresceable = $5 x 70% E $3.5 = 8 $3.5 = 12,000 Viit x $3.5 = 42.000
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