543 Wk1 Essay

648 Words3 Pages
Janis Maraya March 16, 2015 ACC/543 Thomas Frank 4.16 1. Should Yoklic make or buy the subassemblies? Create a schedule that shows the total quantitative differences between the two alternatives. Manufacture Purchase Direct Materials 4 0 Direct Labour 30 0 Variable Overhead 15 0 Fixed Overhead 25 25 Purchase Cost 0 55 Total Unit Cost 74 80 Although the company would save $49 if it chose not to manufacture, the purchase of subassemblies would have a slight increase of $6. To save any money it would be better to manufacture than buy. 2. The accountant decided to investigate the fixed costs to determine whether any incremental changes would occur if the subassembly were no longer manufactured. The accountant believes that Yoklic will eliminate $50,000 of fixed overhead if it accepts the proposal. Does this new information change the decision? Show your calculations. (5000 units) (5000 units) Manufacture Purchase Direct Materials 20000 0 Direct Labour 150000 0 Variable Overhead 75000 0 Fixed Overhead 125000 75000 Purchase Cost 0 275000 Total Unit Cost 370000 350000 Manufacture – Purchase 370000 – 350000 = 20,000 3. Ignore the information in part (B). Now suppose Yoklic could use the capacity released under the buy alternative to make a different subassembly that it currently purchases from a vendor for $20. The manufacturing engineer believes that the company can use the existing equipment to manufacture the subassembly for $13 each (direct materials, direct labor, and variable overhead). The firm uses about 5,000 of these subassemblies. Create a schedule that shows the difference between the two alternatives. (5000 units) (5000 units) Manufacture Purchase Direct Materials 52 0 Direct Labour 390 0 Variable Overhead 195 0 Fixed Overhead 325 25 Purchase Cost 0 20

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