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Determine the maximum amount per unit Whalen Industries could pay an outside supplier? Indicate if the company should make or buy the component and the total dollar difference in favor of that alternative?

Determine the maximum amount per unit Whalen Industries could pay an outside supplier? Indicate if the company should make or buy the component and the total dollar difference in favor of that alternative?

Principles of Accounting Volume 2
Principles of Accounting Volume 2
19th Edition
ISBN:9781947172609
Author:OpenStax
Publisher:OpenStax
Chapter10: Short-term Decision Making
Section: Chapter Questions
Problem 6PA: Gent Designs requires three units of part A for every unit of Al that it produces. Currently, part A...
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Determine the maximum amount per unit Whalen Industries could pay an outside supplier?

Indicate if the company should make or buy the component and the total dollar difference in favor of that alternative?

The management of Whalen Industries has been evaluating whether the company should continue manufacturing a component or buy it from an outside supplier. A $100 cost per component was determined as follows: Direct material Direct labor | Variable manufacturing overhead Fixed manufacturing overhead $ 15 40 10 35 $100 Whalen Industries uses 4,000 components per year. After Wilfert Corporation submitted a bid of $80 per component, some members of management felt they could reduce costs by buying from outside and discontinuing production of the component. If the component is obtained from Wilfert Corporation, Whalen Industries' unused production facilities could be leased to another company for $50,000 per year.
Transcribed Image Text:The management of Whalen Industries has been evaluating whether the company should continue manufacturing a component or buy it from an outside supplier. A $100 cost per component was determined as follows: Direct material Direct labor | Variable manufacturing overhead Fixed manufacturing overhead $ 15 40 10 35 $100 Whalen Industries uses 4,000 components per year. After Wilfert Corporation submitted a bid of $80 per component, some members of management felt they could reduce costs by buying from outside and discontinuing production of the component. If the component is obtained from Wilfert Corporation, Whalen Industries' unused production facilities could be leased to another company for $50,000 per year.
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