1. List the relevant costs of the make and buy alternatives in the table belowDifferential Cost toMakeAlternativesMakeBuyDirect materialsDirect laborVariable overheadPurchase costTotal relevant cost2. If Zion decides to buy the component from Bryce, will operating income increase or decrease, and by how much?Answer3. Assume that 75% of Zion Manufacturing's fixed overhead for Component K2 would be eliminated if that componennt were no longerproduced. If Zion decides to purchase the component from Bryce, by how much will operating income increase or decrease? which1Answer4. Briefly explain how DECREASING the 75% of fixed overhead of fixed overhead for Component K2 would affect Zion'sdecision to make or buy the componentAnswer

Question
Asked Dec 2, 2019
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Use the following information to complete the excercise as follows. 

Zion Manufacturing Company had always made it's componets 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

 

USE THE IMAGE TO ANSWER THE 4 QUESTIONS!

1. List the relevant costs of the make and buy alternatives in the table below
Differential Cost to
Make
Alternatives
Make
Buy
Direct materials
Direct labor
Variable overhead
Purchase cost
Total relevant cost
2. If Zion decides to buy the component from Bryce, will operating income increase or decrease, and by how much?
Answer
3. Assume that 75% of Zion Manufacturing's fixed overhead for Component K2 would be eliminated if that componennt were no longer
produced. If Zion decides to purchase the component from Bryce, by how much will operating income increase or decrease? which
1
Answer
4. Briefly explain how DECREASING the 75% of fixed overhead of fixed overhead for Component K2 would affect Zion's
decision to make or buy the component
Answer
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1. List the relevant costs of the make and buy alternatives in the table below Differential Cost to Make Alternatives Make Buy Direct materials Direct labor Variable overhead Purchase cost Total relevant cost 2. If Zion decides to buy the component from Bryce, will operating income increase or decrease, and by how much? Answer 3. Assume that 75% of Zion Manufacturing's fixed overhead for Component K2 would be eliminated if that componennt were no longer produced. If Zion decides to purchase the component from Bryce, by how much will operating income increase or decrease? which 1 Answer 4. Briefly explain how DECREASING the 75% of fixed overhead of fixed overhead for Component K2 would affect Zion's decision to make or buy the component Answer

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Expert Answer

Step 1

Hey, since there are multiple requirements posted, we will answer first three requirements. If you want any specific question(s) to be answered then please submit that question only or specify the requirement number in your message.

Step 2

The following table represents the relevant cost of internal production and external purchase:

help_outline

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Make or buy decision Internal production Relevant costs Direct material, Direct labor and variable manufacturing overhead The relevant cost of purchasing the component would be the purchase price External production

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Step 3

1. List the relevant costs of the make and buy alternative:

The following table represent...

help_outline

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Details Make Вuy Relevant Costs: Purchase Cost $25.00 $12.00 Direct Material Direct Labour Variable overhead $8.25 $4.50 $24.75 $25.00 Total Differential cost to make per unit ($24.75-$25.00) (S0.25)

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