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Category > Accounting Posted 11 Jul 2017 My Price 6.00

B-24.02 Pure Comfort manufactures and sells

B-24.02 Pure Comfort manufactures and sells mattresses with adjustable air chambers. Pure
Comfort has been producing and selling approximately 500,000 units per year. Each
units sells for $600, and there are no variable selling, general, or administrative costs.
The company has been approached by a foreign supplier who wishes to provide the air
compressor component for $90 per unit. Total annual manufacturing costs, including air
compressors, is as follows: Direct materials $ 50,000,000 Direct labor 80,000,000 Variable factory overhead 16,000,000 Fixed factory overhead 35,000,000 If Pure Comfort outsources the air compressor, it is expected that direct materials will be
reduced by 20%, direct labor by 30%, and variable factory overhead by 25%. There will
be no reduction in fixed factory overhead.
(a) Should Pure Comfort outsource the air compressor? (b) If outsourcing the air compressor will free up capacity, and enable Pure Comfort to
increase production and sales to 600,000 units per year, would it make sense to
outsource? Name:
Date: B-24.02 Section: (a) Internal
Direct materials - $ - Direct labor - - Variable factory overhead - - Fixed factory overhead - - Outsourced compressors - - Total cost of each option (b) $ Outsource $ - $ 

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SuperTutor
(15)
Status NEW Posted 11 Jul 2017 09:07 AM My Price 6.00

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