Bob Company is deciding whether to continue manufacturing their own screens for their best- selling phone. Here are the manufacturing
costs:
1. 100,000 screens were produced by the assembly department
2. Variable manufacturing costs for each screen were:
|
Direct Materials |
10.00 |
|
|
Direct Labor |
20.00 |
|
|
Indirect Labor |
1.00 |
|
|
Variable Utilities |
0.30 |
|
|
Indirect Materials |
0.20 |
3. Fixed manufacturing costs were:
|
Depreciation |
200,000 |
|
Property Taxes |
60,000 |
|
Fixed Utilities |
20,000 |
|
Insurance |
10,000 |
4. If Apple purchases the screens, they can avoid 20% of depreciation and 40% of insurance.
5. The lowest quote from the supplier was $35 per screen.
6. If the screens are purchased, incoming shipping charges would be $0.02 per unit there would be an additional $1,000
incurred by Bob Company’s receiving department.
Instructions:
a. Determine whether Bob Company should make the screens or buy the screens. Create two columns ‘ Make and Buy. List
each expense like we did in the practice. Paste this table into a Word document and make a decision.
b. If Bob Company purchases these screens, they can use this extra factory space to manufacture another product that
would generate $400,000 of profit. You do not need to show a new table. Just explain your response in a sentence or two.
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