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Accounting

by | Nov 30, 2023 | questions

Sycamore Company uses a certain part in its manufacturing process that it buys from an outside supplier for $38 per part plus another $4 for
shipping and other purchasing-related costs. The company will need 29,100 of these parts in the next year and is considering making the part
internally. After performing a capacity analysis, Sycamore determined that it has sufficient unused capacity to manufacture the 29,100 parts
but would need to hire a manager at an annual salary of $58,200 to oversee this production activity. Estimated production costs are determined
to be:

Direct material $ 21
Direct labor 11
Variable overhead 5
Fixed overhead (includes manager at $2 per unit) 6
Total unit cost $

43

Identify the relevant costs to make this part internally. (Select all that apply.)

rev: 05-11-2011

Historical cost
Direct labor
Direct material
Variable overhead
Fixed overhead
New manager’s salary

Should Sycamore produce the part or continue to buy it from the outside supplier?

rev: 05-11-2011

Sycamore should continue to buy it from the outside supplier.
Sycamore should produce the part.
Sycamore is indifferent about the decision

eBook Links (2)references

5.

value:
1.50 points

(c)

What are the other factors that Sycamore Company should consider in deciding to make the part internally?
(Select all that apply.)

v: 05-11-2011

Total sales quantity.

The potential for improved control over the availability of the parts by having it when
needed and the potential for improved quality of the parts.

Since Sycamore Company is considering the use of currently available capacity, it should
evaluate any relevant opportunity costs of using this capacity for more profitable
activities

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