Check Your Wok c o 061 points MSI is considening outsourcing the production of t
ID: 2437855 • Letter: C
Question
Check Your Wok c o 061 points MSI is considening outsourcing the production of the handheld control module used with sone of ts products The company han eceived a bid from Monte Legand Co (ic to produce 24,000 units of the moduile per year for $27 00 each. The following iefotion petains to Msrs producton ofe control modules Direat abor n mind for the space that in currendy dedicaned to the control module production 1. Compule the dfference in cost bebween making and buying the control module 2. Should MSI buy the modles from MLC or contus to make command oplion nrol option commandExplanation / Answer
1-
Making
Buying
No of units
24000
24000
cost to purchase
648000
Direct material
312000
Direct labor
144000
variable manufacturing overhead
168000
fixed manufacturing cost
168000
168000
total cost
792000
816000
difference in cost to buy instead of making
-24000
It is better to Make
2-
Making
Buying
No of units
24000
24000
cost to purchase
648000
Direct material
312000
Direct labor
144000
variable manufacturing overhead
168000
fixed manufacturing cost
168000
168000
income from rent
-30000
total cost
792000
786000
difference in cost to buy instead of making
6000
It is better to purchase- yes change should be recommended
1-
Making
Buying
No of units
24000
24000
cost to purchase
648000
Direct material
312000
Direct labor
144000
variable manufacturing overhead
168000
fixed manufacturing cost
168000
168000
total cost
792000
816000
difference in cost to buy instead of making
-24000
It is better to Make
2-
Making
Buying
No of units
24000
24000
cost to purchase
648000
Direct material
312000
Direct labor
144000
variable manufacturing overhead
168000
fixed manufacturing cost
168000
168000
income from rent
-30000
total cost
792000
786000
difference in cost to buy instead of making
6000
It is better to purchase- yes change should be recommended