The following production costs are provided for AudioPro Co., a manufacturer of high quality headphones.
Manufacturing Costs:
$\begin{array}{lrr}
\text { Direct Materials } &\$60\
\text { Direct Labor } &38\
\text { Variable Overhead } &22\
\text { Fixed Overhead} &\underline{50}\
\text { Total } &\underline{\$170}\
\end{array}$

It has been determined that the headphones could be purchased from Integrated Labs at a cost of $135 plus $8 shipping costs.Considering the offer from Integrated Labs, show whether AudioPro should make or buy the product.
(a.)Assume 40% of fixed overhead allocated to making headphones relates to a production manager who would not be retained if the headphones were not produced by AudioPro.
(b.)How would your analysis change if AudioPro could use capacity resources for alternative activities that would produce a contribution of $35 per unit?
(c.)What is your understanding of the term outsourcing? Briefly explain.

Question

The following production costs are provided for AudioPro Co., a manufacturer of high quality headphones.
Manufacturing Costs:
 $\begin{array}{lrr}
  \text { Direct Materials } &\$60\
 \text { Direct Labor } &38\
 \text { Variable Overhead } &22\
 \text {  Fixed Overhead} &\underline{50}\
 \text { Total } &\underline{\$170}\
\end{array}$
 
It has been determined that the headphones could be purchased from Integrated Labs at a cost of $135 plus $8 shipping costs.Considering the offer from Integrated Labs, show whether AudioPro should make or buy the product.
(a.)Assume 40% of fixed overhead allocated to making headphones relates to a production manager who would not be retained if the headphones were not produced by AudioPro.
(b.)How would your analysis change if AudioPro could use capacity resources for alternative activities that would produce a contribution of $35 per unit?
(c.)What is your understanding of the term outsourcing? Briefly explain.

Quizplus · Accepted Answer

The Answer of The following production costs are provided for AudioPro Co., a manufacturer of high quality headphones.
Manufacturing Costs:
 $\begin{array}{lrr}
  \text { Direct Materials } &\$60\
 \text { Direct Labor } &38\
 \text { Variable Overhead } &22\
 \text {  Fixed Overhead} &\underline{50}\
 \text { Total } &\underline{\$170}\
\end{array}$
 
It has been determined that the headphones could be purchased from Integrated Labs at a cost of $135 plus $8 shipping costs.Considering the offer from Integrated Labs, show whether AudioPro should make or buy the product.
(a.)Assume 40% of fixed overhead allocated to making headphones relates to a production manager who would not be retained if the headphones were not produced by AudioPro.
(b.)How would your analysis change if AudioPro could use capacity resources for alternative activities that would produce a contribution of $35 per unit?
(c.)What is your understanding of the term outsourcing? Briefly explain.

The Following Production Costs Are Provided for AudioPro Co It Has Been Determined That the Headphones Could Be Purchased