Question 1 Vandelay Industries has been manufacturing its own touch screens for its cellular phones. The company is currently operating at 100% of capacity. Variable manufacturing overhead is charged to production at the rate of 55% of direct labor cost. The direct materials and direct labor cost per unit to make the touch screens are $3.90 and $5.90, respectively. Normal production is 38.000 cellular phones per year. A supplier offers to make the touch screens at a price of $13.59 per unit. If Vandelay Industries accepts the supplier's offer, all variable manufacturing costs will be eliminated, but the $36.860 of foed manufacturing overhead currently being charged to the touch screens will remain. A) Prepare the incremental analysis for the decision to make or buy the touch screens. B) Based on the quantitative factors, would you recommend that Vandelay Industries continue to make the touch screens, or buy them from the supplier? Are there any qualitative factors to consider aside from the quantitative factors? Discuss possible advantages and disadvantages of outsourcing the production of a component.

Question 1 Vandelay Industries has been manufacturing its own touch screens for its cellular phones. The company is currently operating at 100% of capacity. Variable manufacturing overhead is charged to production at the rate of 55% of direct labor cost. The direct materials and direct labor cost per unit to make the touch screens are $3.90 and $5.90, respectively. Normal production is 38.000 cellular phones per year. A supplier offers to make the touch screens at a price of $13.59 per unit. If Vandelay Industries accepts the supplier's offer, all variable manufacturing costs will be eliminated, but the $36.860 of foed manufacturing overhead currently being charged to the touch screens will remain. A) Prepare the incremental analysis for the decision to make or buy the touch screens. B) Based on the quantitative factors, would you recommend that Vandelay Industries continue to make the touch screens, or buy them from the supplier? Are there any qualitative factors to consider aside from the quantitative factors? Discuss possible advantages and disadvantages of outsourcing the production of a component.

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 39E: (Appendix 11A) Manufacturing Cycle Efficiency Kurena Company provided the following information on...

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(Appendix 11A) Manufacturing Cycle Efficiency Kurena Company provided the following information on one of its factories: Maximum units produced in a quarter: 180,000 units Actual units produced in a quarter: 112,500 units Hours of cell production labor in a quarter: 30,000 hours Theoretical cycle time: 10 minutes per unit Actual cycle time: 16 minutes per unit Required: 1. Calculate the amount of processing time per unit and the amount of nonprocessing time per unit. 2. Calculate the MCE (rounded to three significant digits).