Ultimate Beauty (UB) manufactures vanity tables. Management is considering producing the glamor mirrors for their vanity tables rather than continuing to purchase from their current supplier. The supplier charges $35 per mirror.
The cost accounting team has estimated that UB would incur the following costs if they were to produce the mirrors instead:
$\bullet$$20 per mirror for direct materials
$\bullet$$5 per mirror for direct labor
$\bullet$$5 per mirror for variable overhead
$\bullet$$15 per mirror for fixed overhead application.
UB is currently producing at full capacity, and they would need to invest in new manufacturing equipment that could be used to manufacture the mirrors. The manufacturing equipment would cost $30,000, and it is estimated that it would last long enough to produce 15,000 mirrors.
What would be the total cost difference if the company produced the mirrors rather than purchasing them?

Question

Ultimate Beauty (UB) manufactures vanity tables. Management is considering producing the glamor mirrors for their vanity tables rather than continuing to purchase from their current supplier. The supplier charges $35 per mirror. 
The cost accounting team has estimated that UB would incur the following costs if they were to produce the mirrors instead:
$\bullet$$20 per mirror for direct materials
$\bullet$$5 per mirror for direct labor
$\bullet$$5 per mirror for variable overhead
$\bullet$$15 per mirror for fixed overhead application.
UB is currently producing at full capacity, and they would need to invest in new manufacturing equipment that could be used to manufacture the mirrors. The manufacturing equipment would cost $30,000, and it is estimated that it would last long enough to produce 15,000 mirrors.
What would be the total cost difference if the company produced the mirrors rather than purchasing them?

Quizplus · Accepted Answer

The Answer of Ultimate Beauty (UB) manufactures vanity tables. Management is considering producing the glamor mirrors for their vanity tables rather than continuing to purchase from their current supplier. The supplier charges $35 per mirror. 
The cost accounting team has estimated that UB would incur the following costs if they were to produce the mirrors instead:
$\bullet$$20 per mirror for direct materials
$\bullet$$5 per mirror for direct labor
$\bullet$$5 per mirror for variable overhead
$\bullet$$15 per mirror for fixed overhead application.
UB is currently producing at full capacity, and they would need to invest in new manufacturing equipment that could be used to manufacture the mirrors. The manufacturing equipment would cost $30,000, and it is estimated that it would last long enough to produce 15,000 mirrors.
What would be the total cost difference if the company produced the mirrors rather than purchasing them?

Ultimate Beauty (UB) Manufactures Vanity Tables ∙\bullet∙ $20 Per Mirror for Direct Materials

Ultimate Beauty (UB) Manufactures Vanity Tables $\bullet$ $20 Per Mirror for Direct Materials