Assignment: Differential Analysis
Describe the circumstances of the following case study and recommend a course of action. Explain your approach to the problem, perform relevant calculations and analysis, and formulate a recommendation. Ensure your work and recommendation are thoroughly supported.
Case Study:
A vacuum manufacturer has prepared the following cost data for manufacturing one of its engine components based on the annual production of 50,000 units.
DescriptionCost per MonthDirect Materials $75,000Direct Labor$100,000Total$175,000
In addition, variable factory overhead is applied at $7.50 per unit. Fixed factory overhead is applied at 150% of direct labor cost per unit. The vacuums sell for $150 each. A third party has offered to make the engines for $60 per unit. 75% of fixed factory overhead, which represents executive salaries, rent, depreciation, and taxes, continue regardless of the decision. Should the company make or buy the engines?
Superior papers will:
o Perform all calculations correctly.
o Articulate the approach to solving the problem, including which financial information is relevant and not relevant.
o Correctly conclude on whether the company should make or buy the engines.
Propose other factors that should be considered when making this decision and elaborate on whether or not those factors do or do not support the decision.
Format your assignment according to the following formatting requirements:
o The answer should be typed, using Times New Roman font (size 12), double spaced, with one-inch margins on all sides.
o The response also includes a cover page containing the title of the assignment, the student's name, the course title, and the date. The cover page is not included in the required page length.
o Also include a reference page. The Citations and references must follow APA format. The reference page is not included in the required page length.