Part JT is used in one of Timberlake's products. The company's Accounting Department reports the following costs of producing the 12,000 units of the part that are needed every year. Direct Materials $4.16 Direct labor $1.22 Variable overhead $2.99 Supervisor's salary $3.18 Depreciation of special equipment $2.44 Allocated general overhead $1.63 An outside supplier has offered to make the part and sell it to the company for $14.56 each. If this offer is accepted, the supervisor's salary and all of the variable costs, including direct labor, can be avoided. The special equipment used to make the part was purchased many years ago and has no salvage value or other use. The allocated general overhead represents fixed costs of the entire company. If the outside supplier's offer were accepted, only $5761 of these allocated general overhead costs would be avoided. What is the relevant TOTAL cost (NOT per unit) to make the part?
Variance Analysis
In layman's terms, variance analysis is an analysis of a difference between planned and actual behavior. Variance analysis is mainly used by the companies to maintain a control over a business. After analyzing differences, companies find the reasons for the variance so that the necessary steps should be taken to correct that variance.
Standard Costing
The standard cost system is the expected cost per unit product manufactured and it helps in estimating the deviations and controlling them as well as fixing the selling price of the product. For example, it helps to plan the cost for the coming year on the various expenses.
Part JT is used in one of Timberlake's products. The company's Accounting Department reports the following costs of producing the 12,000 units of the part that are needed every year.
Direct Materials $4.16
Direct labor $1.22
Variable overhead $2.99
Supervisor's salary $3.18
Depreciation of special equipment $2.44
Allocated general overhead $1.63
An outside supplier has offered to make the part and sell it to the company for $14.56 each. If this offer is accepted, the supervisor's salary and all of the variable costs, including direct labor, can be avoided. The special equipment used to make the part was purchased many years ago and has no salvage value or other use. The allocated general overhead represents fixed costs of the entire company. If the outside supplier's offer were accepted, only $5761 of these allocated general overhead costs would be avoided.
What is the relevant TOTAL cost (NOT per unit) to make the part? Round only your final answer to the nearest dollar and enter as a positive number . Do not round intermediate calcuations.
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