3. Manufacturing vs. Outsourcing: Your company must decide whether to manufacture a part in-house or outsource it. Manufacturing it in-house costs $150 per unit with a fixed cost of $80,000. Outsourcing it to a supplier in China costs $250 per unit. Build a model to determine the best option at every level of output your company produces.

3. Manufacturing vs. Outsourcing: Your company must decide whether to manufacture a part in-house or outsource it. Manufacturing it in-house costs $150 per unit with a fixed cost of $80,000. Outsourcing it to a supplier in China costs $250 per unit. Build a model to determine the best option at every level of output your company produces.

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Concord, Inc. is unsure of whether to sell its product assembled or unassembled. The unit cost of the unassembled product is $13, while the cost of assembling each unit is estimated at $15. Unassembled units can be sold for $54, while assembled units could be sold for $60 per unit. What decision should Concord make? O Sell before assembly; the company will save $9 per unit. Process further; the company will save $9 per unit. O Process further; the company will save $6 per unit. O Sell before assembly; the company will save $4 per unit.
MMM Inc. manufactures unpainted furniture. It currently sells for 25. Production cost per unit are 12 variable and 8 fixed. The Company is considering painting the product and sell it for 35. Additional variable cost to paint each product is expected to be 9 and fixed cost is expected to be 2. What is the amount of incremental benefit or (cost) if the product is processed further as painted furniture?
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Diversity Ltd. produces and sells a product called Star. The company is currently selling 9,560 units of the product which represent £143,400. Total fixed costs equal £66,920 and total contribution equals £66,920. Required: Considering this information, is Diversity Ltd. selling a profitable amount of its product Star and which would be your advice for the company? Which is the price per unit at which Diversity Ltd. is selling its product? Explain your answer in detail. Consider that, after an increase in the market demand of product Star, Diversity Ltd. sells 25% more units of product Star. In this new situation, is Diversity Ltd. selling a profitable amount of its product Star? Explain your answer in detail. Draw a graph related to your previous answers in a) and b). Consider the information from the graph, which would be the financial situation of Diversity Ltd. if sales decrease in more than 25%?
Diversity Ltd. produces and sells a product called Star. The company is currently selling 9,560 units of the product which represent £143,400. Total fixed costs equal £66,920 and total contribution equals £66,920. Required: Considering this information, is Diversity Ltd. selling a profitable amount of its product Star and which would be your advice for the company? Which is the price per unit at which Diversity Ltd. is selling its product? Explain your answer in detail.Consider that, after an increase in the market demand of product Star, Diversity Ltd. sells 25% more units of product Star. In this new situation, is Diversity Ltd. selling a profitable amount of its product Star? Explain your answer in detail.Draw a graph related to your previous answers in a) and b). Consider the information from the graph, which would be the financial situation of Diversity Ltd. if sales decrease in more than 25%?
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Find minimum, maximum and appropriate transfer price