Zion Manufacturing had always made its components in-house. However, Bryce Component Works had recently offered to
Zion Manufacturing had always made its components in-house. However, Bryce Component Works had recently offered to supply one component, K2, at a price of $25 each. Zion uses 10,000 units of Component K2 each year. The cost per unit of this component is as follows:
Direct materials $12.00
Direct labor $8.25
Variable overhead $4.50
Fixed overhead $2.00
Total $26.75
The fixed overhead is an allocated expense; none of it would be eliminated if production of Component K2 stopped.
Required:
1. What are the alternatives facing Zion Manufacturing with respect to production of Component K2?
2. List the relevant costs for each alternative. If Zion decides to purchase the component from Bryce, by how much will operating income increase or decrease? Which alternative is better?
How it Works
1
It only takes a couple of minutes to fill in your details, select the type of paper you need (essay, term paper, etc.), give us all necessary information regarding your assignment.
2
Once we receive your request, one of our customer support representatives will contact you within 24 hours with more specific information about how much it'll cost for this particular project.
3
After receiving payment confirmation via PayPal or credit card – we begin working on your detailed outline, which is based on the requirements given by yourself upon ordering.
4
Once approved, your order is complete and will be emailed directly to the email address provided before payment was made!