eztomheducation com Accounting Web Slice Gallery 99 Names of

ezto.mheducation com Accounting Web Slice Gallery 99 Names of A. .teric Online AC live NelsonBrain- My Home login.aro Windows H-streaming Personnaliser les liens Google BMO - Bank of...ine Banking Apple Bing Aplia Yahoo Chapter 9 Quiz for Marks (15%) g question Chegg.com The Brain Teasers (TBT) specializes in creating and manufacturing board games for youth. Each game has a unique game board to accompany the other pieces of the game. The company is at the final development stage of a new game called \"Inverted World\" based on a recent fictional book and subsequent film of the same name. Since it is important that the game be on the shelves quickly to capitalize on the advertising and promotion done by the movie studio for the film, the manager of TBT is considering an offer from another game manufacturer to supply the game boards for $18.50 per board. This is a common practice in the game industry as the life of a toy is very short and there is a need to act quickly to get the product to market before demand shifts. TBT\'s cost accountant has developed the followwing cost estimates for the production of the game board: Cost per Unit of Inverted World Direct material 7.00 Direct labour Corporate overhead Cost of game board 3.00 7.24 1.30 $18.54 The accountant has also provided the follawing information: The board can be produced using current machinery that has a capacity to produce 500,000 units per month and is 50% utilized The anticipated demand for the game will not exceed 50,000 units a month, according to the sales team. Half of the production overhead is fixed. The corporate overhead allocation is based on 18.6% of the direct materials charge. Required: Compute monthly net benefit of making the game boards than buy the game boards from the supplier. (Do not round intermediate calculations.) t benefit of making the boards per month State whether TBT should make the game boards or buy from the supplier make buy

Solution

Fixed Productionoverhead will continue to be incurred whether board is internally manufactured or purchased from outside so it is irrelevant while making decision

Also ,corporate overhead is an allocated cost therefore is also irrelevant.

Net benefit per month =monthly sales [cost of purchase-cost of manufacturing]

         = 50000[18.50-13.62]

         = 50000* 4.88

         = $ 244000

B)TBT should make the board as it will result in net benefit of $244000

	If manufactured	If purchased
Direct material	7
Direct labor	3
variable production overhead	3.62    [7*50%variable]
purchase cost		18.50
Net cost per board	13.62	18.50