Grant Enterprises manufactured 6,000 units of a component part that is used in its product and incurred the following costs:
Direct materials $70,000
Direct labor 30,000
Variable manufacturing overhead 20,000
Fixed manufacturing overhead 40,000
$160,000
Another company has offered to sell the same component part to the company for $24 per unit. The fixed manufacturing overhead consists mainly of depreciation on the equipment used to manufacture the part and would not be reduced if the component part was purchased from the outside firm.
Instructions
a) Prepare an incremental analysis report for Grant Enterprises which can serve as informational input into this make or buy decision. Should Grant make or buy the part? Why?
b) Prepare another incremental analysis for Grant Enterprises if the company has the opportunity to use the factory equipment to produce another product which is estimated to have a contribution margin of $28,000. Should Grant make or buy the part? Why?
I'm not an accounting major but I was hoping someone could e-mail me an excel spreadsheet of this problem. I'm needing the correct answer to use to study for my final exam.
Thanks for the ones who do help. I would greatly appreciate it. omgcorey at gmail dot com is my e-mail for the ones who do help.
Direct materials $70,000
Direct labor 30,000
Variable manufacturing overhead 20,000
Fixed manufacturing overhead 40,000
$160,000
Another company has offered to sell the same component part to the company for $24 per unit. The fixed manufacturing overhead consists mainly of depreciation on the equipment used to manufacture the part and would not be reduced if the component part was purchased from the outside firm.
Instructions
a) Prepare an incremental analysis report for Grant Enterprises which can serve as informational input into this make or buy decision. Should Grant make or buy the part? Why?
b) Prepare another incremental analysis for Grant Enterprises if the company has the opportunity to use the factory equipment to produce another product which is estimated to have a contribution margin of $28,000. Should Grant make or buy the part? Why?
I'm not an accounting major but I was hoping someone could e-mail me an excel spreadsheet of this problem. I'm needing the correct answer to use to study for my final exam.
Thanks for the ones who do help. I would greatly appreciate it. omgcorey at gmail dot com is my e-mail for the ones who do help.
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