94) The juncture in manufacturing where the joint products become individually identifiable.

95) Any costs beyond the split-off point.

96) The costs of manufacturing joint products prior to the split-off point.

97) The periodic cost of equipment which is spread over the future periods in which the equipment is expected to be used.

98) The original cost of equipment less accumulated depreciation, which is the summation of depreciation charged to past periods.

99) A cost that has already been incurred and is irrelevant to the decision-making process.

100) The management of Hillsboro Industries is evaluating whether the company should continue manufacturing a component or buy it from an outside supplier. Based upon their accounting records, it appears that it costs the company $80 per unit to make the component. The $80 cost per component was determined as follows:

Direct material$16

Direct labour30

Variable manufacturing overhead12

Fixed manufacturing overhead  22


Hillsboro Industries uses 10,000 components per year.  After Ricardo Inc. submitted a bid of $70 per component, some members of management felt they could reduce costs by buying from outside and discontinuing production of the component.

If the component is obtained from Ricardo Inc., $5 of fixed manufacturing overhead per unit would be avoided and Hillsboro’s unused production facilities could be leased to another company for $30,000 per year.

Based upon relevant cost differences, should Hillsboro Industries make or buy the component?  Include your supporting calculations.

Source link

Leave a Reply

Your email address will not be published. Required fields are marked *