EBK ACCOUNTING PRINCIPLES
13th Edition
ISBN: 9781119411017
Author: Weygandt
Publisher: WILEY
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Chapter 23, Problem 4BE
To determine
Concept Introduction:
Making or buy decisions involves, making choice between manufacturing a certain part or buying from the outside supplier. The decision, in this case, is based on incremental benefit between two alternatives.
Whether the product will be purchased or manufactured.
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Students have asked these similar questions
Blossom Industries incurs unit costs of $7 ($4 variable and $3 fixed) in making an assembly part for its finished product. A supplier
offers to make 10,900 of the assembly part at $5 per unit. If the offer is accepted, Blossom will save all variable costs but no fixed costs.
Prepare an analysis showing the total cost saving, if any, that Blossom will realize by buying the part. (Enter negative amounts using
either a negative sign preceding the number e.g. -45 or parentheses e.g. (45).)
Variable manufacturing costs
Fixed manufacturing costs
Purchase price
Total annual cost
The decision should be to
eTextbook and Media
+A
Make
◆ the part.
$
Buy
LA
$
Net Income
Increase (Decrease)
Answer the following questions.
1. Douglas Computers makes 5,900 units of a circuit board, CB76 at a cost of $220 each. Variable cost per unit is $170 and fixed cost per unit is $50. Peach
Electronics offers to supply 5,900 units of CB76 for $200. If Douglas buys from Peach it will be able to save $20 per unit in fixed costs but continue to incur the
remaining $30 per unit. Should Douglas accept Peach's offer? Explain.
1. Douglas Computers makes 5,900 units of a circuit board, CB76 at a cost of $220 each. Variable cost per unit is $170 and fixed cost per unit is $50. Peach
Electronics offers to supply 5,900 units of CB76 for $200. If Douglas buys from Peach it will be able to save $20 per unit in fixed costs but continue to incur the
remaining $30 per unit. Should Douglas accept Peach's offer? Explain.
Begin by calculating the relevant cost per unit. (If a box is not used in the table, leave the box empty; do not enter a zero.)
Make
Buy
Relevant costs:
Unit relevant cost
Douglas…
Crane Industries incurs unit costs of $6 ($4 variable and $2 fixed) in making an assembly part for its finished product. A supplier offers
to make 13,500 of the assembly part at $5 per unit. If the offer is accepted, Crane will save all variable costs but no fixed costs. Prepare
an analysis showing the total cost saving, if any, that Crane will realize by buying the part. (Enter negative amounts using either a negative
sign preceding the number e.g. -45 or parentheses e.g. (45).)
Variable manufacturing
costs
Fixed manufacturing costs
Purchase price
Total annual cost
The decision should be to
$
Make
the part
$
Buy
$
$
Net Income
Increase (Decrease)
Chapter 23 Solutions
EBK ACCOUNTING PRINCIPLES
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