Larkin, Inc

question 143

Essay

Larkin, Inc. uses 1,000 units of the component NJF1 every month to manufacture one of its products. The unit costs incurred to manufacture the component are as follows:
Overhead costs include variable material handling costs of $10, which are applied to products on the basis of direct material costs. The remainder of the overhead costs are applied on the basis of direct labor dollars and consist of 50% variable costs and 50% fixed costs.
A vendor has offered to supply the NJF1 component at a price of $175 per unit.
Instructions
(a) Should Larkin purchase the component from the outside vendor if its capacity remains idle?
(b) Should Larkin purchase the component from the outside vendor if it can use its facilities to manufacture another product? What information will Larkin need to make an accurate decision? Show your calculations.

---

Definitions:

Bar Chart

A graphical representation of data using bars of varying lengths to show the values of different categories or groups.

Continuous Quantitative Variable

A variable that can take an infinite number of values within a given range, representing measurable quantities.

Interval of Values

A range of values within which a specified parameter falls, often used in statistics to describe confidence intervals.

Multivariate Data

Data involving two or more variables that are analyzed together to understand patterns and relationships.