Terry Inc. manufactures machine parts for aircraft engines. CEO Bucky Walters is considering an offer from a subcontractor to provide 2,000 units of product OP89 for $120,000. If Terry does not purchase these parts from the subcontractor, it must continue to produce them in-house with these costs: Cost per unit (S) Direct Materials 28 Direct Labor 18 Variable Overhead 16 Allocated Fixed Overhead 4 Required 1. What is the relevant cost to make the product internally? 2. What is the estimated increase or decrease in short-term operating profit of producing the product internally versus purchasing the product from a supplier? 3. Which alternative is more attractive to Terry Inc, make or buy the machine parts? 4. What strategic considerations likely becar on this make vs buy decision? (at least 2 considerations)

Terry Inc. manufactures machine parts for aircraft engines. CEO Bucky Walters is considering an offer from a subcontractor to provide 2,000 units of product OP89 for $120,000. If Terry does not purchase these parts from the subcontractor, it must continue to produce them in-house with these costs: Cost per unit (S) Direct Materials 28 Direct Labor 18 Variable Overhead 16 Allocated Fixed Overhead 4 Required 1. What is the relevant cost to make the product internally? 2. What is the estimated increase or decrease in short-term operating profit of producing the product internally versus purchasing the product from a supplier? 3. Which alternative is more attractive to Terry Inc, make or buy the machine parts? 4. What strategic considerations likely becar on this make vs buy decision? (at least 2 considerations)

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Terry Inc. manufactures machine parts for aircraft engines. CEO Bucky Walters is considering an offerfrom a subcontractor to provide 2,000 units of product OP89 for $120,000. If Terry does not purchasethese parts from the subcontractor, it must continue to produce them in-house with these costs:Cost per unit($)Direct Materials 28Direct Labor 18Variable Overhead 16Allocated Fixed Overhead 4Required1. What is the relevant cost to make the product internally?2. What is the estimated increase or decrease in short-term operating profit of producing the productinternally versus purchasing the product from a supplier?3. Which alternative is more attractive to Terry Inc, make or buy the machine parts?4. What strategic considerations likely bear on this make vs buy decision? (at least 2 considerations)
Terry Inc. manufactures machine parts for aircraft engines. CEO Bucky Walters is considering an offer from a subcontractor to provide 2,000 units of product OP89 for $120,000. If Terry does not purchase these parts from the subcontractor, it must continue to produce them in-house with these costs: Cost per unit ($) Direct Materials 28 Direct Labor 18 Variable Overhead 16 Allocated Fixed Overhead 4 Required1. What is the relevant cost to make the product internally?2. What is the estimated increase or decrease in short-term operating profit of producing the product internally versus purchasing the product from a supplier?
Terry Inc. manufactures machine parts for aircraft engines. CEO Bucky Walters is considering an offer from a subcontractor to provide 2,000 units of product OP89 for $120,000. If Terry does not purchase these parts from the subcontractor, it must continue to produce them in-house with these costs: Cost per unit ($) Direct Materials 28 Direct Labor 18 Variable Overhead 16 Allocated Fixed Overhead 4 Required3. Which alternative is more attractive to Terry Inc, make or buy the machine parts?4. What strategic considerations likely bear on this make vs buy decision? (at least 2 considerations)
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! Required information [The following information applies to the questions displayed below.] Each of the following situations is independent: Make or Buy Terry Incorporated manufactures machine parts for aircraft engines. CEO Bucky Walters is considering an offer from a subcontractor to provide 2,350 units of product OP89 for $190,350. If Terry does not purchase these parts from the subcontractor, it must continue to produce them in-house with these costs: Direct materials Direct labor Variable overhead Allocated fixed overhead Required: Cost per Unit $ 35 25 23 4 1. What is the relevant cost per unit to make the product internally? 2. What is the estimated increase or decrease in short-term operating profit of producing the product internally versus purchasing the product from a supplier?