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(Solved by Expert Tutors) hey, need homework helpUse the following information for Exercises


Use the following information for Exercises 13-24 and 13-25:

Zion

Manufacturing had always made its components in-house. However, Bryce Component Works had recently offered to supply one component, K2, at a price of $25 each. Zion uses 10,000 units of Component K2 each year. The cost per unit of this component is as follows:

Direct materials

$12.00

Direct labor

8.25

Variable overhead

4.50

Fixed overhead

??2.00

??Total

$26.75


OBJECTIVE?1 2


Exercise 13-24?Make-or-Buy Decision

Refer to the information for Zion Manufacturing above. The fixed overhead is an allocated expense; none of it would be eliminated if production of Component K2 stopped.

Required:

  • 1.What are the alternatives facing Zion Manufacturing with respect to production of Component K2?
  • 2.List the relevant costs for each alternative. If Zion decides to purchase the component from Bryce, by how much will operating income increase or decrease?
  • 3.CONCEPTUAL CONNECTION?Which alternative is better?


 


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Apr 19, 2020

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