Martin's Company has purchased 20,000 pumps annually from Andres Company. Due to price increasing and it has reached P40 per unit last year, Martin is considering to manufacture the pump in their facilities. The accounting, manufacturing and engineering departments have prepared a report for management that includes the following estimate for an assembly run of 20,000 pumps. Additional production employees would be hired to manufacture the pumps but no additional equipment, space, or supervision would be needed. The report states that the total costs for 20,000 units are estimated at P979,000 or P48.95. The current purchase price is P40 per unit, so the report recommends continued to purchase of the product. DM P140,000 *DL 300,000 450,000 **MOH **General and Admin OH 450,000 P979,000 Total cost "Assembly labor consists of hourly production workers. **Manufacturing overhead is applied to products on a DL basis FOH 50% DLH VOH 100% DLн мон 150% DLH ***General and Admin overhead is applied at 10% of the total costs of materials, labor and manufacturing overhead. Was the analysis of three departments correct? Should the company continue to buy the product from outside supplier or manufacture its own? Explain and show computation.
Martin's Company has purchased 20,000 pumps annually from Andres Company. Due to price increasing and it has reached P40 per unit last year, Martin is considering to manufacture the pump in their facilities. The accounting, manufacturing and engineering departments have prepared a report for management that includes the following estimate for an assembly run of 20,000 pumps. Additional production employees would be hired to manufacture the pumps but no additional equipment, space, or supervision would be needed. The report states that the total costs for 20,000 units are estimated at P979,000 or P48.95. The current purchase price is P40 per unit, so the report recommends continued to purchase of the product. DM P140,000 *DL 300,000 450,000 **MOH **General and Admin OH 450,000 P979,000 Total cost "Assembly labor consists of hourly production workers. **Manufacturing overhead is applied to products on a DL basis FOH 50% DLH VOH 100% DLн мон 150% DLH ***General and Admin overhead is applied at 10% of the total costs of materials, labor and manufacturing overhead. Was the analysis of three departments correct? Should the company continue to buy the product from outside supplier or manufacture its own? Explain and show computation.
Essentials of Business Analytics (MindTap Course List)
2nd Edition
ISBN:9781305627734
Author:Jeffrey D. Camm, James J. Cochran, Michael J. Fry, Jeffrey W. Ohlmann, David R. Anderson
Publisher:Jeffrey D. Camm, James J. Cochran, Michael J. Fry, Jeffrey W. Ohlmann, David R. Anderson
Chapter15: Decision Analysis
Section: Chapter Questions
Problem 5P: Hudson Corporation is considering three options for managing its data warehouse: continuing with its...
Related questions
Question
I need an answer to this, please. Thank you!
Transcribed Image Text:Martin's Company has purchased 20,000 pumps annually from Andres Company. Due to price increasing
and it has reached P40 per unit last year, Martin is considering to manufacture the pump in their
facilities. The accounting, manufacturing and engineering departments have prepared a report for
management that includes the following estimate for an assembly run of 20,000 pumps. Additional
production employees would be hired to manufacture the pumps but no additional equipment, space,
or supervision would be needed.
The report states that the total costs for 20,000 units are estimated at P979,000 or P48.95. The current
purchase price is P40 per unit, so the report recommends continued to purchase of the product.
DM
P140,000
*DL
300,000
**MOH
450,000
*General and Admin OH
450,000
Total cost
P979,000
*Assembly labor consists of hourly production workers.
**Manufacturing overhead is applied to products on a DL basis
FOH
50% DLH
VOH 100% DLH
мон 150% DLH
***General and Admin overhead is applied at 10% of the total costs of materials, labor and
manufacturing overhead.
Was the analysis of three departments correct? Should the company continue to buy the product from
outside supplier or manufacture its own? Explain and show computation.
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
This is a popular solution!
Trending now
This is a popular solution!
Step by step
Solved in 2 steps with 1 images
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.Recommended textbooks for you
Essentials of Business Analytics (MindTap Course …
Statistics
ISBN:
9781305627734
Author:
Jeffrey D. Camm, James J. Cochran, Michael J. Fry, Jeffrey W. Ohlmann, David R. Anderson
Publisher:
Cengage Learning
Principles of Accounting Volume 2
Accounting
ISBN:
9781947172609
Author:
OpenStax
Publisher:
OpenStax College
Managerial Accounting: The Cornerstone of Busines…
Accounting
ISBN:
9781337115773
Author:
Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger
Publisher:
Cengage Learning
Essentials of Business Analytics (MindTap Course …
Statistics
ISBN:
9781305627734
Author:
Jeffrey D. Camm, James J. Cochran, Michael J. Fry, Jeffrey W. Ohlmann, David R. Anderson
Publisher:
Cengage Learning
Principles of Accounting Volume 2
Accounting
ISBN:
9781947172609
Author:
OpenStax
Publisher:
OpenStax College
Managerial Accounting: The Cornerstone of Busines…
Accounting
ISBN:
9781337115773
Author:
Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger
Publisher:
Cengage Learning
Cornerstones of Cost Management (Cornerstones Ser…
Accounting
ISBN:
9781305970663
Author:
Don R. Hansen, Maryanne M. Mowen
Publisher:
Cengage Learning