Beto Company pays $6.90 per unit to buy a part for one of the products it manufactures. With excess capacity, the company isconsidering making the part. Making the part would cost $7.80 per unit for direct materials and $1.00 per unit for direct labor. Thecompany normally applies overhead at the predetermined rate of 200% of direct labor cost. Incremental overhead to make the partwould be 80% of direct labor cost.(a) Prepare a make or buy analysis of costs for this part. (Enter your answers rounded to 2 decimal places.)(b) Should Beto make or buy the part?(a) Make or Buy AnalysisDirect materialsDirect laborOverheadCost to buyCost per unitCost difference(b) Company should:MakeBuy

Requirement:- 1)Preparation of a make or buy analysis of costs for this unit as follows under:-

Answered: would be 80% of direct labor cost. (a)…

would be 80% of direct labor cost. (a) Prepare a make or buy analysis of costs for this part. (Enter your answers rounded to 2 decimal places.) (b) Should Beto make or buy the part?

Principles of Accounting Volume 2

19th Edition

ISBN:9781947172609

Author:OpenStax

Publisher:OpenStax

Chapter6: Activity-based, Variable, And Absorption Costing

Section: Chapter Questions

Problem 2PB: Five Card Draw manufactures and sells 10,000 units of Aces, which retails for $200, and 8,000 units...

See similar textbooks

Related questions

Q: The net book value of Falcon Inc.'s property, plant, and equipment (PP&E) was $734.550 on January 1,…

A: The gain or loss on sale of fixed asset is calculated as difference between the book value and sale…

Q: Define the following and provide respective examples; Simple interest Compound interest Annual…

A: Simple Interest: Simple interest is a type of interest calculation where the interest amount is…

Q: Cullumber Inc. assigns $4728000 of its accounts receivables as collateral for a $3.30 million loan…

A: The journal is frequently referred to as the "book of original entries" because it serves as the…

Q: 17. Horatio and Magdalena are married, file a joint return, and have two children, ages 3 and 6.…

A: for tax year 2022, U.S households must have a combined income of less than $15,000 to get maximum…

Q: Newland Company is considering investing in one of two projects – A or B. The initial cost and net…

A: Introduction: Accounting rate of return: Accounting rate of return is calculated as under:…

Q: Sep. 6 Issued 500 shares of common stock to the promoters who organized the corporation, receiving…

A: The journal entries are prepared to keep the record of day to day transactions of the business on…

Q: Mint Company is preparing a flexible budget for next year and requires a breakdown of the factory…

A: Variable Cost :— It is the cost that changes with change in cost driver. Variable cost per cost…

Q: Alexander Inc. makes basketballs. The results for the year were as follows: Basketballs…

A: Since you have posted a question with multiple sub-parts, we will solve first three subparts for…

Q: equirements Journalize Helio's transactions during August 2024, assuming Helio uses the direct…

A: Introduction:- Journal entry is the first stage of accounting process. Journal entry used to record…

Q: Vignette #1 The Deluxe Motorcar in northern California manufactures motor cars of all categories.…

A: The budgeted revenue is the total amount that a company generates by selling its product to…

Q: uring the current year, Peach Industries' reports sales of $184,000 and an average Odays. The…

A: Introduction:- The following formula used to calculate gross margin percentage as follows:- Gross…

Q: Q1: How much is the average capital balance of Mr. Chow for the year 2019? Q2: How much is the share…

A: Meaning of partnership a business or an organization where more than two people share losses equally…

Q: Millbourne corporation has acquired a property that includes both land and a building for $550,000.…

A: Percent of total appraised value = (Appraised value of asset / Total Appraised value of all…

Q: Your gross annual pay is $19 163. Employment insurance premiums are deducted at a rate of 2.25% and…

A: You can reduce the amount of taxes you owe by taking advantage of tax deductions, which are items…

Q: Assuming the company uses FIFO, record the adjusting journal entry needed at the end of October to…

A: The cost of sold on FIFO basis given to be $258,100. The total purchase cost comes out to be…

Q: Cypress would have to produce the special order on an overtime shift, which would increase the…

A: Introduction:- Break-even point point means, where no profit or loss At Break-even point point,…

Q: 1. A corporation issued 9,000 shares of $10 par value common stock for $108,000 cash. 2. A…

A: The journal entries are prepared to keep the record of day to day transactions of the business on…

Q: Grace Jones was just hired as an accounting intern at your company. Can you assist Grace and…

A: The cash budget is prepared to estimate the cash balance at the end of period. It helps to…

Q: Month January February March April Estimate unit variable costs: $240/unit $73.33/unit Units…

Q: Sheffield Company reported net income of $73000 for the year. During the year, accounts receivable…

A: the company from prepare the cash flow statement in order to know the cash flow position and also…

Q: Adjustments to Net Income-Indirect Method Kingston Corporation's accumulated depreciation-equipment…

A: Cash flows- operating activities - is a part of the 3 main parts of the Cash flow statement.…

Q: Gerrard acquired an item of plant at a cost of £800,000 on 1 January 2018 that is used to produce…

A: Asset is assessed for impairment on a yearly basis, and accordingly accounted for impairment if…

Q: Sheffield Company has the following information available: Net income, $22000; Cash provided by…

A: The amount of cash flows generated by an entity during a period and which are free from all kind of…

Q: Makindu fries Enterprises Ltd manufactures food products. The details of the manufacturing cost of…

A: APPROPRIATE MATERIAL VARIANCE MATERIAL COST VARIANCE Standard Cost - Actual Cost = ( 6 kg X…

Q: Natalia and Eric each own 40% of partnership NEW. On August 15, 2021, Natalia sold her interest to…

A: When a commercial partnership is wound up, any and all outstanding legal and financial…

Q: Identify at least three weaknesses in Parktown's revenue cycle procedures, explain the associated…

A: The doctor approves the write-off of the uncollectible receivables in addition to providing credit.…

Q: On January 1, 20X1 ABC Company issued a $1,000,000 10-year bond with a stated interest rate of 9%…

A: Bonds :Bonds is a long-term debts issued by the government and companies to raise funds for their…

Q: Maru Mi Company had Taxable Income amounting to P750,000 before considering the following…

A: Taxable Income is that income can be computed after making deductions for all the losses incurred in…

Q: nitial investment at various sale prices Edwards Manufacturing Company (EMC) is considering…

A: Depreciation is an accounting technique for distributing a tangible or fixed asset's cost over its…

Q: Accounting for share investments Check Figure 2: Carrying value per share, $19.63 River Outdoor…

A: Stock investment It is a process under which shares are bought in a public company. Those shares are…

Q: d. If the selling price per lamp was reduced by $30, determine: (i) the break even point in dollars.…

A: Break even point (BEP): Breakeven is the point where total expenses are equal to total revenue. at…

Q: question 33

A: Traditional IRA is one of the plans which are used by the taxpayers so that the tax amount which is…

Q: Lanfield, Inc. Comparative Income Statement Years Ended December 31, 2024 and 2023 2024 2023 Net…

A: Financial ratios are one of the most effective techniques for analyzing a company's financial…

Q: Prepare the journal entries for the following situations On August 10. Travis company purchased…

A: Journal Entry: Journal entry is the act of keeping records of transactions in an accounting journal.…

Q: a. What was the book value of the equipment at December 31 the end of the fourth year? b. Assuming…

A: 1. Depreciation = (Cost of the asset - Estimated residual value ) ÷ Estimated useful life of the…

Q: During 2014, Whitefish Industries reported net income of $49,000, paid a cash dividend of $32,000.…

A: Cash flow from operating activity includes cash inflow and outflow related to business operations.…

Q: Describe the usefulness of a discretionary intervivos trust when used as part of an estate freeze.

A: A discretionary intervivos trust (DIT) can be a useful tool when used as part of an estate freeze.…

Q: Oreo reported the following for the period: Sales P1,000,000 Cost of Sales P300,000 Operating…

A: Answer:- Optional standard deduction (OSD):- The OSD permitted cannot be more than forty percent of…

Q: Pritchett Company reported the following year-end data: Cash $ 15,000 Short-term investments…

A: Introduction:- Ratio analysis used identify the business performance of the company. It is used to…

Q: Prepare journal entries to record the following transactions for Emerson Corporal transaction/event,…

A: Solution... Journal Entries are given Below :

Q: Good Scent, Inc., produces two colognes: Rose and Violet. Of the two, Rose is more popular. Data…

A: The overhead rate is calculated as total estimated overhead cost divided by estimated base activity.…

Q: See Clear Company manufactures clear plastic CD cases. It applies variable overhead based on the…

A: Variable overhead rate variance: Variable Overhead Rate Variance is the difference between what the…

Q: 12) ABSD INC.'s B.O.D's approved issuance of 5,000,000 share of $50 par value common stock.…

A: Dividends are paid in two types Stock dividends and Cash dividends. Stock dividend means a payment…

Q: Wilco Inc. allocates overhead on the basis of direct labor hours. They report the following budgeted…

A: Solution... Predetermined overhead rate = Budgeted manufacturing overhead/ budgeted labor hours

Q: Sales Cost of goods sold Accounts receivable 2021 $ 611,353 302,063 29,467 2020 $ 399,577 197,543…

A: Introduction: Trend analysis is a tool used by the management to evaluate performance of the company…

Q: ONE At Stardust Gems, a faux gem and jewelry company, the setting department is a bottleneck. The…

A: Lets understand the basics. As the bottleneck the name suggest is a block of workflow in the…

Q: Schedule of Activity Costs Quality Control Activities Product testing Assessing vendor quality…

A: Value added costs are those which add value to the goods or services whereas non-value added costs…

Q: The Mulenga & Co. Ltd is a single-product manufacturing company, which uses a marginal costing…

A: Marginal costing It is the cost to produce one additional unit of production. This helps determine…

Q: Olive Company makes silver belt buckles. The company's master budget appears in the first column of…

A: The flexible budget is prepared for different units of production on the basis of variable cost rate…

Q: help trouble finding a solution

A: Medical expenses add up for Self, spouse, or dependent's medical expenses cost receipts these could…

Question

100%

Beto Company pays $6.90 per unit to buy a part for one of the products it manufactures. With excess capacity, the company is
considering making the part. Making the part would cost $7.80 per unit for direct materials and $1.00 per unit for direct labor. The
company normally applies overhead at the predetermined rate of 200% of direct labor cost. Incremental overhead to make the part
would be 80% of direct labor cost.
(a) Prepare a make or buy analysis of costs for this part. (Enter your answers rounded to 2 decimal places.)
(b) Should Beto make or buy the part?
(a) Make or Buy Analysis
Direct materials
Direct labor
Overhead
Cost to buy
Cost per unit
Cost difference
(b) Company should:
Make
Buy

Expert Solution

This question has been solved!

Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.

SEE SOLUTION Check out a sample Q&A here

Step 1

Step 2

Step 3

Step 4

Step by step

Solved in 4 steps

SEE SOLUTION Check out a sample Q&A here

Knowledge Booster

Learn more about

Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.

Similar questions

Remarkable Enterprises requires four units of part A for every unit of Al that it produces. Currently, part A is made by Remarkable, with these per-unit costs in a month when 4,000 units were produced: Variable manufacturing overhead is applied at $1.60 per unit. The other $0.50 of overhead consists of allocated fixed costs. Remarkable will need 8,000 units of part A for the next years production. Altoona Corporation has offered to supply 8,000 units of part A at a price of $8.00 per unit. If Remarkable accepts the offer, all of the variable costs and $2,000 of the fixed costs will be avoided. Should Remarkable accept the offer from Altoona Corporation?
Gent Designs requires three units of part A for every unit of Al that it produces. Currently, part A is made by Gent, with these per-unit costs in a month when 4.000 units were produced: Variable manufacturing overhead is applied at $1.00 per unit. The other $0.30 of overhead consists of allocated fixed costs. Gent will need 6,000 units of part A for the next years production. Cory Corporation has offered to supply 6,000 units of part A at a price of $7.00 per unit. It Gent accepts the offer, all of the variable costs and $1,200 of the fixed costs will be avoided. Should Gent Designs accept the offer from Cory Corporation?
Bobcat uses a traditional cost system and estimates next years overhead will be $800.000, as driven by the estimated 25,000 direct labor hours. It manufactures three products and estimates the following costs: If the labor rate is $30 per hour, what is the per-unit cost of each product?
Colonels uses a traditional cost system and estimates next years overhead will be $480,000, with the estimated cost driver of 240,000 direct labor hours. It manufactures three products and estimates these costs: If the labor rate is $25 per hour, what is the per-unit cost of each product?
Brees, Inc., a manufacturer of golf carts, has just received an offer from a supplier to provide 2,600 units of a component used in its main product. The component is a track assembly that is currently produced internally. The supplier has offered to sell the track assembly for 66 per unit. Brees is currently using a traditional, unit-based costing system that assigns overhead to jobs on the basis of direct labor hours. The estimated traditional full cost of producing the track assembly is as follows: Prior to making a decision, the companys CEO commissioned a special study to see whether there would be any decrease in the fixed overhead costs. The results of the study revealed the following: 3 setups1,160 each (The setups would be avoided, and total spending could be reduced by 1,160 per setup.) One half-time inspector is needed. The company already uses part-time inspectors hired through a temporary employment agency. The yearly cost of the part-time inspectors for the track assembly operation is 12,300 and could be totally avoided if the part were purchased. Engineering work: 470 hours, 45/hour. (Although the work decreases by 470 hours, the engineer assigned to the track assembly line also spends time on other products, and there would be no reduction in his salary.) 75 fewer material moves at 30 per move. Required: 1. Ignore the special study, and determine whether the track assembly should be produced internally or purchased from the supplier. 2. Now, using the special study data, repeat the analysis. 3. Discuss the qualitative factors that would affect the decision, including strategic implications. 4. After reviewing the special study, the controller made the following remark: This study ignores the additional activity demands that purchasing would cause. For example, although the demand for inspecting the part on the production floor decreases, we may need to inspect the incoming parts in the receiving area. Will we actually save any inspection costs? Is the controller right?
Rulers Company is a neon sign company that estimated overhead will be $60,000, consisting of 1,500 machine hours. The cost to make Job 416 is $95 in neon, 15 hours of labor at $13 per hour, and five machine hours. During the month, it incurs $95 in indirect material cost, $130 in administrative labor, $320 in utilities, and $350 in depreciation expense. What is the predetermined overhead rate if machine hours are considered the cost driver? What is the cost of Job 416? What is the overhead incurred during the month?
Cozy, Inc., manufactures small and large blankets. It estimates $950,000 in overhead during the manufacturing of 360,000 small blankets and 120,000 large blankets. What is the predetermined overhead rate if a small blanket takes 2 hours of direct labor and a large blanket takes 3 hours of direct labor?
Crystal Pools estimates overhead will utilize 250,000 machine hours and cost $750,000. It takes 2 machine hours per unit, direct material cost of $14 per unit, and direct labor of $20 per unit. What is the cost of each unit produced?
Boarders estimates overhead will utilize 160,000 machine hours and cost $80,000. It takes 4 machine hours per unit, direct material cost of $5 per unit, and direct labor of $5 per unit. What is the cost of each unit produced?
The following product costs are available for Stellis Company on the production of erasers: direct materials, $22,000; direct labor, $35,000; manufacturing overhead, $17,500; selling expenses, $17,600; and administrative expenses; $13,400. What are the prime costs? What are the conversion costs? What is the total product cost? What is the total period cost? If 13,750 equivalent units are produced, what is the equivalent material cost per unit? If 17,500 equivalent units are produced, what is the equivalent conversion cost per unit?
Patz Company produces two types of machine parts: Part A and Part B, with unit contribution margins of 300 and 600, respectively. Assume initially that Patz can sell all that is produced of either component. Part A requires two hours of assembly, and B requires five hours of assembly. The firm has 300 assembly hours per week. Required: 1. Express the objective of maximizing the total contribution margin subject to the assembly-hour constraint. 2. Identify the optimal amount that should be produced of each machine part and the total contribution margin associated with this mix. 3. What if market conditions are such that Patz can sell at most 75 units of Part A and 60 units of Part B? Express the objective function with its associated constraints for this case and identify the optimal mix and its associated total contribution margin.
The following product Costs are available for Haworth Company on the production of chairs: direct materials, $15,500; direct labor, $22.000; manufacturing overhead, $16.500; selling expenses, $6,900; and administrative expenses, $15,200. What are the prime costs? What are the conversion costs? What is the total product cost? What is the total period cost? If 7,750 equivalent units are produced, what is the equivalent material cost per unit? If 22,000 equivalent units are produced, what is the equivalent conversion cost per unit?