The RST Company makes 38,000 parts to be used in its main products. The cost per part at this activity level is: Direct materials
$
6.50
Direct labor
$
6.60
Variable manufacturing overhead
$
3.75
Fixed manufacturing overhead
$
3.45

An outside supplier offered to supply RST Company this part at $18 per unit. If RST Company decides not to make the parts, there would be no other use for the production facilities and none of the fixed manufacturing overhead cost could be avoided. Direct labor is a variable cost. The annual financial advantage (disadvantage) for the company as a result of buying these parts from the outside supplier rather than making them internally would be:

($186,200)

($87,400)

($43,700)

$87,400

($43,700)

Explanation:

38,000 units produced:

outside supplier offers parts at $18 per unit

fixed manufacturing overhead is unavoidable

                                Alternative 1             Alternative 2        Differential

                                keep producing       buy                        amount

Prod. cost                $771,400                               $0            $771,400

Purchase cost                    $0                  $684,000            ($684,000)

Unavoidable costs            $0                     $131,100               ($131,100)

total                         $771,400                    $815,100               ($43,700)

The financial disadvantage of purchasing the parts from an outside vendor = ($43,700)

b. condominum i think

a manufacturer of printed circuit boards uses exponential smoothing with trend to forecast monthly demand of its product. at the end of december, the company wishes to forecast sales for january. the estimate of trend through november has been 200 additional boards sold per month. average sales have been around 1000 units per month. the demand for december was 1100 units. the company uses α = 0.20 and β = 0.10. make a forecast including trend for the month of january.