Question

Question One (6 marks) Samsung manufacturing a variety of cell phones components. An outside supplier offered to sell screens to Samsung for $35 per unit To evaluate this offer, Samsung has gathered the following information relating to its own cost of producing the keyboards internally: Details $ Per Unit 14,000 unit per year Direct materials 11 154,000 Direct labor 98.000 Variable manufacturing overhead 5 70,000 Fixed manufacturing overhead - traceable 4. 56,000 Fixed manufacturing overhead - common but 12 168,000 allocated to screens line Total Cost 39 546,000 Required: Assuming that traceable overhead includes 65%-line supervisory salaries and 35% factory space rent for all Samsung's manufactured components, should the outside supplier's offer be accepted? Show all computations. (use total analysis approach) Details $ Per unit Make 14,000 unit Buy 14,000 unit Direct Material Direct labor Variable Manufacturing overhead Fixed Manufacturing overhead - Traceable Fixed Manufacturing overhead - common Outside purchase price Total

Answer 1

Buy 14,000 per unit unit $11 Details Direct Material Direct Labor Variable Manufacturing overhead Fixed Manufacturing overhead-Traceable Fixed Manufacturing overhead-Common Outside purchase price Make 14,000 unit $154,000 $98,000 $70,000 $56,000 $168,000 $12 $35 $168,000 $490,000 $658,000 Total $546,000 Note: It is assumed entire traceable fixed manufacturing overhead can be avoided No the Outside supplier's should not be accepted since cost to make in-house is lower