Subject- accounting Make-or-Buy DecisionZion Manufacturing had always made its components in-house. However, Bryce Component Works had recently offered to supply one component, K2, at a price of $27 each. Zion uses 11,500 units ofComponent K2 each year. The cost per unit of this component is as follows:Direct materialsDirect laborVariable overheadFixed overheadTotalRequired:$12.008.25Assume that 75% of Zion Manufacturing's fixed overhead for Component K2 would be eliminated if that component were no longer produced.4.506.00$30.75Increase1. Conceptual Connection: If Zion decides to purchase the component from Bryce, by how much will operating income increase or decrease?25,875 ✔Which alternative is better?Purchase the component from Bryce2. Conceptual Connection: By how much would the per unit relevant fixed cost have to decrease before Zion would be indifferent (i.e., incur the same cost) between "making" versus "purchasing"the component? If necessary, round your answer to two decimal places.X %

Managerial accounting is more focused towards analyzing information and reporting it to the internal…

Make-or-Buy Decision Zion Manufacturing had always made its components in-house. However, Bryce Component Works had recently offered to supply one component, K2, at a price of $27 each. Zion uses 11,500 units of Component K2 each year. The cost per unit of this component is as follows: Direct materials Direct labor Variable overhead Fixed overhead Total $12.00 Required: 8.25 4.50 6.00 $30.75 Assume that 75% of Zion Manufacturing's fixed overhead for Component K2 would be eliminated if that component were no longer produced. 1. Conceptual Connection: If Zion decides to purchase the component from Bryce, by how much will operating income increase or decrease? Increase ✔ $ 25,875 ✔ Which alternative is better? Purchase the component from Bryce ✔ 2. Conceptual Connection: By how much would the per unit relevant fixed cost have to decrease before Zion would be indifferent (i.e., incur the same cost) between "making" versus "purchasing" the component? If necessary, round your answer to two decimal places. X %

Make-or-Buy Decision Zion Manufacturing had always made its components in-house. However, Bryce Component Works had recently offered to supply one component, K2, at a price of $27 each. Zion uses 11,500 units of Component K2 each year. The cost per unit of this component is as follows: Direct materials Direct labor Variable overhead Fixed overhead Total $12.00 Required: 8.25 4.50 6.00 $30.75 Assume that 75% of Zion Manufacturing's fixed overhead for Component K2 would be eliminated if that component were no longer produced. 1. Conceptual Connection: If Zion decides to purchase the component from Bryce, by how much will operating income increase or decrease? Increase ✔ $ 25,875 ✔ Which alternative is better? Purchase the component from Bryce ✔ 2. Conceptual Connection: By how much would the per unit relevant fixed cost have to decrease before Zion would be indifferent (i.e., incur the same cost) between "making" versus "purchasing" the component? If necessary, round your answer to two decimal places. X %

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

Chapter8: Tactical Decision-making And Relevant Analysis

Section: Chapter Questions

Problem 39E

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