Question Details

(Solved) (Latest ver. Aug 2020) - Make or Buy - Borealis Manufacturing

Brief item decscription


Item details:

Question:

(See attached file for full problem description)

---
P6-2A The management of Borealis Manufacturing Company is trying to decide whether to continue manufacturing a part or to buy it from an outside supplier. The part called, WISCO, is a component of the company's finished product.

The following information was collected from the accounting records and production data for the year ending December 31, 2005

1. 7,000 units of WISCO were produced in the Machining Department.
2. Variable manufacturing costs applicable to the production of each WISCO unit were: direct materials $4.80, direct labor $4.30, indirect labor $0.43, utilities $0.40.
3. Fixed manufacturing costs applicable to the production of WISCO were:

Cost ItemDirectAllocated
Depreciation$2,100 $900
Property taxes500200
Insurance900600
$3,500 $1,700

All variable manufacturing and direct fixed costs will be eliminated if WISCO is purchased. Allocated costs will have to be absorbed by other production departments.

4. The lowest quotation for 7,000 WISCO units from a supplier is $70,000
5. If WISCO units are purchased, freight and inspection costs would be $0.40 per unit, and receiving costs totaling $1,250 per year would be incurred by the Machining Department.

Instructions
(a) Prepare an incremental analysis for WISCO. Your analysis should have columns for (1) Make WISCO, (2) Buy WISCO and (3) Net Income Increase/Decrease.

(b) Based on your analysis, what decision should management make?

(c) Would the decision be different if Boerealis Company has the opportunity to produce $5,000 of net income with the facilities currently being used to manufacture WISCO? Show computations.

(d) What nonfinancial factors should management consider in making its decision?
---

 







About this question:
STATUS
Answered
QUALITY
Approved
ANSWER RATING

This question was answered on: Sep 16, 2020

PRICE: $11.5

Solution~00010735.zip (18.37 KB)

Buy this answer for only: $11.5

Pay using PayPal (No PayPal account Required) or your credit card. All your purchases are securely protected by PayPal.
SiteLock

Need a similar solution fast, written anew from scratch? Place your own custom order

We have top-notch tutors who can help you with your essay at a reasonable cost and then you can simply use that essay as a template to build your own arguments. This we believe is a better way of understanding a problem and makes use of the efficiency of time of the student. New solution orders are original solutions and precise to your writing instruction requirements. Place a New Order using the button below.

Order Now