The Management Of Sunland Manufacturing Company Is Trying To Decide Whether To Continue Manufacturing A Part Or To Buy I 1 (157.95 KiB) Viewed 44 times
The management of Sunland Manufacturing Company is trying to decide whether to continue manufacturing a part or to buy it from an outside supplier. The part, called CISCO, is a component of the company's finished product. The following information was collected from the accounting records and production data for the year ending December 31, 2022. 1.7,900 units of CISCO were produced in the Machining Department. 2. Variable manufacturing costs applicable to the production of each CISCO unit were: direct materials $5.11, direct labor $4.48, indirect labor $0.48, utilities $0.39. 3. Fixed manufacturing costs applicable to the production of CISCO were: Cost Item Direct Allocated Total Depreciation $2,000 $900 $2,900 Property taxes 540 330 870 Insurance 940 560 1,500 $3,480 $1,790 5,270 All variable manufacturing and direct fixed costs will be eliminated if CISCO is purchased. Allocated costs will not be eliminated if CISCO is purchased. So if CISCO is purchased, the fixed manufacturing costs allocated to CISCO will have to be absorbed by other production departments. 4. The lowest quotation for 7,900 CISCO units from a supplier is $83,151. 5. If CISCO units are purchased, freight and inspection costs would be $0.37 per unit, and receiving costs totaling $1,280 per year would be incurred by the Machining Department. (a) Prepare an incremental analysis for CISCO. (Enter negative amounts using either a negative sign preceding the number e.g. -45 or narenthesesec (45).)
Net Income Increase (Decrease) Make CISCO Buy CISCO Direct material $ $ 0 $ ta Direct labor 0 Indirect labor 0 Utilities 0 Depreciation Property taxes Insurance DODON 10000! Purchase price 0 Freight and inspection 0 Receiving costs 0 Total annual cost $ $ $
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