Dough, Re, Mi Inc. sells many different types of cookie dough. The company is deciding whether to continue making its own dough or to outsource. If the company outsources, they will eliminate all of the variable overhead and 30% of the fixed manufacturing overhead. Use the information below to determine whether Dough, Re, Mi Inc. should outsource or not. Data: Units Per unit Relevant? Yes or No Sales price (per unit) 5,450 $ 104.00 Direct materials (per unit) N/A 21.00 Direct labor (per unit) N/A 18.00 Variable manufacturing overhead (per unit) N/A 15.00 Fixed manufacturing overhead (MOH) (per month) : N/A 21.00 Avoidable fixed MOH (per month) N/A Unavoidable fixed MOH (per month) N/A Sales commissions (per unit) N/A 4.00 Advertising costs (per month) N/A 1.60 Purchase price of outsourced product (per unit) N/A 65.00 Shipping costs of outsourced product (per unit) N/A 2.00 Costs per unit Costs per unit Incremental analysis Manufactures Outsource Variable costs: Enter "=0" in the cell for any cost not relevant to the decision. Enter "=0" in the cell for any cost not relevant to the decision. Direct materials Direct labor Variable manufacturing overhead Purchase price Shipping costs Sales commissions Total variable costs Fixed costs Fixed manufacturing overhead Advertising Total fixed costs Incremental cost Should Dough, Re, Mi Inc. manufacture or outsource its dough? Type outsource or manufacture. N/A If Dough, Re, Mi manufactures its own dough, what would its operating income be? Type outsource or manufacture. N/A If Dough, Re, Mi outsources its dough, what would its operating income be? Type outsource or manufacture.

Dough, Re, Mi Inc. sells many different types of cookie dough. The company is deciding whether to continue making its own dough or to outsource. If the company outsources, they will eliminate all of the variable overhead and 30% of the fixed manufacturing overhead. Use the information below to determine whether Dough, Re, Mi Inc. should outsource or not. Data: Units Per unit Relevant? Yes or No Sales price (per unit) 5,450 $ 104.00 Direct materials (per unit) N/A 21.00 Direct labor (per unit) N/A 18.00 Variable manufacturing overhead (per unit) N/A 15.00 Fixed manufacturing overhead (MOH) (per month) : N/A 21.00 Avoidable fixed MOH (per month) N/A Unavoidable fixed MOH (per month) N/A Sales commissions (per unit) N/A 4.00 Advertising costs (per month) N/A 1.60 Purchase price of outsourced product (per unit) N/A 65.00 Shipping costs of outsourced product (per unit) N/A 2.00 Costs per unit Costs per unit Incremental analysis Manufactures Outsource Variable costs: Enter "=0" in the cell for any cost not relevant to the decision. Enter "=0" in the cell for any cost not relevant to the decision. Direct materials Direct labor Variable manufacturing overhead Purchase price Shipping costs Sales commissions Total variable costs Fixed costs Fixed manufacturing overhead Advertising Total fixed costs Incremental cost Should Dough, Re, Mi Inc. manufacture or outsource its dough? Type outsource or manufacture. N/A If Dough, Re, Mi manufactures its own dough, what would its operating income be? Type outsource or manufacture. N/A If Dough, Re, Mi outsources its dough, what would its operating income be? Type outsource or manufacture.

Principles of Accounting Volume 2

19th Edition

ISBN:9781947172609

Author:OpenStax

Publisher:OpenStax

Chapter10: Short-term Decision Making

Section: Chapter Questions

Problem 4EB: Dimitri Designs has capacity to produce 30,000 desk chairs per year and is currently selling all...

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Data:	Units	Per unit	Relevant? Yes or No
Sales price (per unit)	5,450	$ 104.00
Direct materials (per unit)	N/A	21.00
Direct labor (per unit)	N/A	18.00
Variable manufacturing overhead (per unit)	N/A	15.00
Fixed manufacturing overhead (MOH) (per month) :	N/A	21.00
Avoidable fixed MOH (per month)	N/A
Unavoidable fixed MOH (per month)	N/A
Sales commissions (per unit)	N/A	4.00
Advertising costs (per month)	N/A	1.60
Purchase price of outsourced product (per unit)	N/A	65.00
Shipping costs of outsourced product (per unit)	N/A	2.00

	Costs per unit	Costs per unit
Incremental analysis	Manufactures	Outsource
Variable costs:	Enter "=0" in the cell for any cost not relevant to the decision.	Enter "=0" in the cell for any cost not relevant to the decision.
Direct materials
Direct labor
Variable manufacturing overhead
Purchase price
Shipping costs
Sales commissions
Total variable costs
Fixed costs
Fixed manufacturing overhead
Advertising
Total fixed costs
Incremental cost

Should Dough, Re, Mi Inc. manufacture or outsource its dough? Type outsource or manufacture.	N/A
If Dough, Re, Mi manufactures its own dough, what would its operating income be? Type outsource or manufacture.	N/A
If Dough, Re, Mi outsources its dough, what would its operating income be? Type outsource or manufacture.	N/A

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