90.2K

Verified Solution

Link Copied!

Item$2$

$10$

points

Item $2$

Greens, Inc. $($GI$)$ manufactures golf$-$related equipment including golf balls. This year$$s expected production of golf balls is $110,000$ packs $($each consisting of four golf balls$).$ Cost data are as follows:

Per Pack $110,000$ Packs

Product costs directly traceable to balls:

Direct materials $ $2\mathrm{.}50$ $ $275,000$

Direct labour $1\mathrm{.}20132,000$

Variable manufacturing overhead $0\mathrm{.}1516,500$

Fixed manufacturing overhead $37,400$

General allocated overhead $33,000$

$ $493,900$

The full cost of one pack of golf balls is $$4\mathrm{.}49.$ GI has received an offer from an outside supplier to supply any desired quantity of balls at a price of $$5\mathrm{.}55$ per pack of four golf balls. The cost accounting department has provided the following information:

The direct fixed manufacturing overhead is the cost of leasing the machine that stamps out the balls. The machine can produce a maximum of $500,000$ balls per year. If the balls are bought, the machine will no longer be needed.

No other costs will be affected.

Required:

$1.$ Prepare an analysis showing whether GI would be better off making or buying the balls at a projected volume of $110,000$ packs $(440,000$ golf balls$).($Round "Per Unit" answers to $2$ decimal places.$)$

$2-$a$.$ At what volume would GI be indifferent between making and buying? $($Do not round intermediate calculations and round your final answer to nearest whole number.$)$

Answer & Explanation Solved by verified expert

See Answer