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Exercise 3 (Make or Buy a Component) Cañada Inc., manufactures a variety of heating and air-conditioning units. The company is currently manufacturing all of its own component parts. An outside supplier has offered to sell a thermostat to Cañada for P200 per unit. To evaluate this offer, Cañada, Inc., has gathered the following information relating to its own cost of producing the thermostat internally: Per 15,000 Units per Year P 900,000 1,200,000 150,000 750,000 Unit P60 Direct materials. Direct labor.. 80 10 Variable manufacturing overhead.. Fixed manufacturing overhead, traceable . Fixed manufacturing overhead, common, but allocated.. Total cost.. 50* 100 Р300 1,500,000 P4,500,000 • 40% supervisory salaries; 60% depreciation of special equipment (no resale value). Required: 1. Assuming that the company has no alternative use for the facilities now being used to produce the thermostat, should the outside supplier's offer be accepted? Show all computations. 2. Suppose that if the thermostats were purchased, Cañada, Inc., could use the freed capacity to launch a new product. The segment margin of the new product would be P650,000 per year. Should Cañada, Inc., accept the offer to buy the thermostats from the outside supplier for P200 each? Show computations.

Exercise 3 (Make or Buy a Component) Cañada Inc., manufactures a variety of heating and air-conditioning units. The company is currently manufacturing all of its own component parts. An outside supplier has offered to sell a thermostat to Cañada for P200 per unit. To evaluate this offer, Cañada, Inc., has gathered the following information relating to its own cost of producing the thermostat internally: Per 15,000 Units per Year P 900,000 1,200,000 150,000 750,000 Unit P60 Direct materials. Direct labor.. 80 10 Variable manufacturing overhead.. Fixed manufacturing overhead, traceable . Fixed manufacturing overhead, common, but allocated.. Total cost.. 50* 100 Р300 1,500,000 P4,500,000 • 40% supervisory salaries; 60% depreciation of special equipment (no resale value). Required: 1. Assuming that the company has no alternative use for the facilities now being used to produce the thermostat, should the outside supplier's offer be accepted? Show all computations. 2. Suppose that if the thermostats were purchased, Cañada, Inc., could use the freed capacity to launch a new product. The segment margin of the new product would be P650,000 per year. Should Cañada, Inc., accept the offer to buy the thermostats from the outside supplier for P200 each? Show computations.

Survey of Accounting (Accounting I)
Survey of Accounting (Accounting I)
8th Edition
ISBN:9781305961883
Author:Carl Warren
Publisher:Carl Warren
Chapter2: Basic Accounting Systems: Cash Basis
Section: Chapter Questions
Problem 2.6P: Financial statements Alpine Realty. Inc., organized July 1. 20Y8, is operated by Angela Griffin. How...
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8:48 ..l 82 bartleby.com = bartleby Q&A Sign in Business / Accounting / Q&A Library / Exercise 3 (M... Exercise 3 (Make or Buy a Compone... Start your trial now! First week $4.99! nly -> Question Exercise 3 (Make or Buy a Component) Cañada Inc., manufactures a variety of heating and air-conditioning units. The company is currently manufacturing all of its own component parts. An outside supplier has offered to sell a thermostat to Cañada for P200 per unit. To evaluate this offer, Cañada, Inc., has gathered the following information relating to its own cost of producing the thermostat internally: Per 15,000 Units _per Year P 900,000 1,200,000 150,000 750,000 Unit P60 Direct materials Direct labor Variable manufacturing overhead. Fixed manufacturing overhead, traceable Fixed manufacturing overhead, common, but allocated. Total cost.. 80 10 50* 100 P300 1,500,000 P4,500,000 • 40% supervisory salaries; 60% depreciation of special equipment (no resale value). Required: 1. Assuming that the company has no alternative use for the facilities now being used to produce the thermostat, should the outside supplier's offer be accepted? Show all computations. 2. Suppose that if the thermostats were purchased, Cañada, Inc., could use the freed capacity to launch a new product. The segment margin of the new product would be P650,000 per year. Should Cañada, Inc., accept the offer to buy the thermostats from the outside supplier for P200 each? Show computations. ->
Transcribed Image Text:8:48 ..l 82 bartleby.com = bartleby Q&A Sign in Business / Accounting / Q&A Library / Exercise 3 (M... Exercise 3 (Make or Buy a Compone... Start your trial now! First week $4.99! nly -> Question Exercise 3 (Make or Buy a Component) Cañada Inc., manufactures a variety of heating and air-conditioning units. The company is currently manufacturing all of its own component parts. An outside supplier has offered to sell a thermostat to Cañada for P200 per unit. To evaluate this offer, Cañada, Inc., has gathered the following information relating to its own cost of producing the thermostat internally: Per 15,000 Units _per Year P 900,000 1,200,000 150,000 750,000 Unit P60 Direct materials Direct labor Variable manufacturing overhead. Fixed manufacturing overhead, traceable Fixed manufacturing overhead, common, but allocated. Total cost.. 80 10 50* 100 P300 1,500,000 P4,500,000 • 40% supervisory salaries; 60% depreciation of special equipment (no resale value). Required: 1. Assuming that the company has no alternative use for the facilities now being used to produce the thermostat, should the outside supplier's offer be accepted? Show all computations. 2. Suppose that if the thermostats were purchased, Cañada, Inc., could use the freed capacity to launch a new product. The segment margin of the new product would be P650,000 per year. Should Cañada, Inc., accept the offer to buy the thermostats from the outside supplier for P200 each? Show computations. ->
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