Part U67 Is Used in One of Broce Corporation's Products

question 71

Essay

Part U67 is used in one of Broce Corporation's products.The company's Accounting Department reports the following costs of producing the 7,000 units of the part that are needed every year. An outside supplier has offered to make the part and sell it to the company for $21.40 each.If this offer is accepted, the supervisor's salary and all of the variable costs, including direct labor, can be avoided.The special equipment used to make the part was purchased many years ago and has no salvage value or other use.The allocated general overhead represents fixed costs of the entire company.If the outside supplier's offer were accepted, only $6,000 of these allocated general overhead costs would be avoided.

Required:
a.Prepare a report that shows the financial impact of buying part U67 from the supplier rather than continuing to make it inside the company.
b.Which alternative should the company choose?

---

Definitions:

Projective Personality

Techniques in psychological assessment where ambiguous stimuli are presented to individuals with the aim of eliciting responses that reveal aspects of their personality.

Kinetic-House-Tree-Person Test

A projective psychological test that requires subjects to draw a house, a tree, and a person, which are then analyzed to gain insights into their inner workings.

Projective Personality

Projective Personality assessments involve tests that use ambiguous stimuli to elicit responses that reveal aspects of an individual's personality, based on the projection of unconscious processes.

Objective Personality

This refers to personality assessments that are scored using standardized, objective measures, as opposed to subjective judgment.