Exercise 6-13A (Algo) Outsourcing decision affected by opportunity costs LO 6-3 Rooney Electronics currently produces the shipping containers it uses to deliver the electronics products it sells. The monthly cost of producing 9,300 containers follows. Unit-level materials Unit-level labor Unit-level overhead Product-level costs* Allocated facility-level costs $ 5,100 6,700 3,400 8,700 27,500 *One-third of these costs can be avoided by purchasing the containers. Russo Container Company has offered to sell comparable containers to Rooney for $2.50 each. Required a. Calculate the total relevant cost. Should Rooney continue to make the containers? b. Rooney could lease the space it currently uses in the manufacturing process. If leasing would produce $12,300 per month, calculate the total avoidable costs. Should Rooney continue to make the containers? a. Total relevant cost a. Should Rooney continue to make the containers? b. Total avoidable cost Yes b. Should Rooney continue to make the containers? No
Exercise 6-13A (Algo) Outsourcing decision affected by opportunity costs LO 6-3 Rooney Electronics currently produces the shipping containers it uses to deliver the electronics products it sells. The monthly cost of producing 9,300 containers follows. Unit-level materials Unit-level labor Unit-level overhead Product-level costs* Allocated facility-level costs $ 5,100 6,700 3,400 8,700 27,500 *One-third of these costs can be avoided by purchasing the containers. Russo Container Company has offered to sell comparable containers to Rooney for $2.50 each. Required a. Calculate the total relevant cost. Should Rooney continue to make the containers? b. Rooney could lease the space it currently uses in the manufacturing process. If leasing would produce $12,300 per month, calculate the total avoidable costs. Should Rooney continue to make the containers? a. Total relevant cost a. Should Rooney continue to make the containers? b. Total avoidable cost Yes b. Should Rooney continue to make the containers? No
Managerial Accounting: The Cornerstone of Business Decision-Making
7th Edition
ISBN:9781337115773
Author:Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger
Publisher:Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger
Chapter11: Performance Evaluation And Decentralization
Section: Chapter Questions
Problem 47P: (Appendix 11A) Cycle Time, Velocity, Conversion Cost The theoretical cycle time for a product is 30...
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