Robbins Co

question 64

Essay

Robbins Co.has been producing a part for a camera they manufacture.The costs for this part are as follows: Robbins has an opportunity to purchase this part rather than manufacture it.To purchase the part will cost $3 a unit.If the part is purchased,fixed costs will be reduced by 20%.
Should Robbins Co.make or buy this part.Show how you arrived at your decision.

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Definitions:

Conversion Cost

The combined costs of direct labor and manufacturing overheads incurred to convert raw materials into finished goods.

Weighted-Average Method

A cost accounting method that calculates the cost per unit by dividing the total cost by the total number of units produced, considering the weight of each batch.

Conversion Cost

The cost incurred to convert raw materials into finished goods, including labor and manufacturing overhead costs.

Process Costing

A costing method used for homogeneous products, where costs are accumulated over a period and assigned to units produced, typically in manufacturing.