Interdesign uses 1,000 units of the component IMC2 every month to manufacture one of its products. The unit costs incurred to manufacture the component are as follows:
Direct materials .......... $ 65.00
Direct labor ........... 48.00
Overhead ........... 126.50
Total ............. $239.50
Overhead costs include variable material handling costs of $6.50, which are applied to products on the basis of direct material costs. The remainder of the overhead costs are applied on the basis of direct labor dollars and consist of 50% variable costs and 50% fixed costs. A vendor has offered to supply the IMC2 component at a price of $200 per unit.
(a) Should Interdesign purchase the component from the outside vendor if Interdesign?s capacity remains idle?
(b) Should Interdesign purchase the component from the outside vendor if it can use its facilities to manufacture another product? What information will Interdesign need to make an accurate decision? Show your calculations.
(c) What are the qualitative factors that Interdesign will have to consider when making this decision?
This question was answered on: Jul 11, 2017
Need a similar solution fast, written anew from scratch? Place your own custom order
We have top-notch tutors who can help you with your essay at a reasonable cost and then you can simply use that essay as a template to build your own arguments. This we believe is a better way of understanding a problem and makes use of the efficiency of time of the student. New solution orders are original solutions and precise to your writing instruction requirements. Place a New Order using the button below.