Ask Question
12 September, 03:34

Exercise 8-8 (Part Level Submission) The Ayayai Company manufactures 1,249 units of a part that could be purchased from an outside supplier for $14 each. Ayayai's costs to manufacture each part are as follows: Direct materials Direct labor Variable manufacturing overhead Fixed manufacturing overhead $3 Total S18 All fixed overhead is unavoidable and is allocated based on direct labor. The facilities that are used to manufacture the part have no alternative uses. (a-b) (c-d) Your answer is partially correct. Try again (c) Calculate net cost to buy if Ayayai leases the manufacturing facilities to another company for $8,085 per yean Net cost to buy $ (d) Would your answer change if Ayayai could lease the manufacturing facilities to another company for $8,085 per year? Yes

+2
Answers (1)
  1. 12 September, 03:58
    0
    current manufacturing costs for 1,249 units:

    total variable costs (including direct materials, direct labor and variable overhead) per unit = $9 total fixed costs per unit = $9 total costs = $18

    an outside vendor offers to supply the parts at $14 per unit

    all fixed manufacturing costs are unavoidable.

    the net cost to buy if Ayayai is able to lease the manufacturing facilities for $8,085 per year:

    net cost to buy without the lease = (purchase price - variable costs) x 1,249 units = ($14 - $9) x 1,249 = $6,245

    the net cost to buy with the lease = $6,245 - $8,085 = - $1,840, which means that Ayayai would actually save money by purchasing the parts if it is able to lease the facilities.
Know the Answer?
Not Sure About the Answer?
Find an answer to your question 👍 “Exercise 8-8 (Part Level Submission) The Ayayai Company manufactures 1,249 units of a part that could be purchased from an outside supplier ...” in 📗 Business if the answers seem to be not correct or there’s no answer. Try a smart search to find answers to similar questions.
Search for Other Answers