FratFiles

• Save Paper

Minnetonka has approached a subcontractor to discuss the possibility of purchasing the bindings. The purchase price of the bindings from the subcontractor would be $5.25 per binding, or $10.50 per pair. If the Minnetonka Corporation accepts the purchase proposal, it is predicted that direct labor and variable-overhead costs would be reduced by 10% and direct-material costs would be reduced by 20%.
1. Should the Minnetonka Corporation make or buy the bindings? Show calculations to support your answer.
• Minnetonka should buy the bindings as it costs less per pair to buy them ($79.50) rather than to make them ($80.00):
make Discount Calculation buy
Direct Labor $ 35.00 -10% $35 - ($35 * .1) $ 31.50
Direct material $ 30.00 -20% $30 - ($30 * .2) $ 24.00
Overhead $ 15.00 -10% $15 - ($15 * .1) $ 13.50
subtotal $ 69.00
+ bindings $ 10.50
Total $ 80.00 $ 79.50
2.......

View the rest of this paper...

Approximate Word Count: 534
Approximate Pages: 3 (250 words per double-spaced page)

Similar Essays

1. Activity Based Costing
   

   Activity Based Costing Introduction The purpose of this report is to explore Activity Based Costing (ABC) specifically as it applies to the application of overhead costs to jobs

2. 3 Activity Based Costing
   

   3 Activity Based Costing Minnetonka has approached a subcontractor to discuss the possibility of purchasing the bindings. The purchase price of the bindings from the subcontractor

3. Abc- Activity Based Costing
   

   ABC- activity based costing 1a) Activity based costing is a relatively new type of procedure that can be used as an inventory valuation method. The technique was developed to

4. Activity-Based Costing
   

   Activity-Based Costing One tool that can aid a company in measuring success is the balanced scorecard. In 1992, this concept was created by Dr. Robert S. Kaplan and Dr. David P.

5. Case Study: Activity Based Costing
   

   Case Study: Activity Based Costing At a recent management meeting at Coverdrive Ltd, the members of the senior management team discussed the introduction of a new product to the