Coyle Company Manufactured 6,000 Units of a Component Part That

question 176

Essay

Coyle Company manufactured 6,000 units of a component part that is used in its product and incurred the following costs:
Another company has offered to sell the same component part to the company for $13 per unit. The fixed manufacturing overhead consists mainly of depreciation on the equipment used to manufacture the part and would not be reduced if the component part was purchased from the outside firm. If the component part is purchased from the outside firm, Coyle Company has the opportunity to use the factory equipment to produce another product which is estimated to have a contribution margin of $22,000.
Instructions
Prepare an incremental analysis report for Coyle Company which can serve as informational input into this make or buy decision.

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Definitions:

Preoperational

A stage in Piaget's theory of cognitive development (ages 2-7) in which children are unable to perform operations or logical thought processes.

Normal Operational

Normal Operational refers to the standard, routine, or expected processes and functions of a system, machine, or organization under regular or usual conditions.

Sensorimotor

A developmental stage in young children characterized by learning through interacting with their environment using senses and muscle movements.

Formal Operational

The stage in Piaget’s theory of cognitive development where individuals learn to think logically about abstract concepts and hypothetical situations.