Answer Happy

Ch 17 Make-or-Buy Decision, Alternatives, Relevant Costs Each year, Giada Company produces 21,000 units of a component part used in tablet computers. An outside supplier has offered to supply the part for $1.17. The unit cost is: $0.7 0.32 Direct materials Direct labor Variable overhead Fixed overhead Total unit cost 0.05 2.05 W $3.12 Required: 1. What are the alternatives for Giada Company? Make the part in house or buy the part externally 2. Assume that none of the fixed cost is avoidable. List the relevant cost(s) of internal production. Direct materials, direct labor and variable overhead List the relevant cost(s) of external purchase. Purchase price 3. Which alternative is more cost effective and by how much? Making the part in house by s 4. What if $18,160 of fixed overhead is rental of equipment used only in production of the component that can be avoided if the component is purchased? Which alternative is more cost effective and by how Check My Work
Ch 17 List the relevant cost(s) of external purchase. Purchase price 3. Which alternative is more cost effective and by how much? Making the part in house by s 4. What if $18,160 of fixed overhead is rental of equipment used only in production of the component that can be avoided if the component is purchased? Which alternative is more cost effective and by how much? Buying the part from the external supplier ✓ by V Feedback Check My Work > 1. Review what you have learned in the chapter. 2. Relevant costs are future costs that differ across alternatives. For each cost given, ask yourself if the company would incur different amounts of the costs, in total, for each alternative. 3. Set up the analysis with the relevant costs organized under a column heading for each alternative. what is the difference between the two alternatives? 4. Will this cost differ between the alternatives? If so, redo the analysis to account for this cost. What is the difference between the two alternatives? See Examples