Question

Alanco, inc. Manufactures a variety of products and is currently manufacturing all of its own component parts. An outside supplier has offered to sell one of those components to alanco. The controller has asked you to help evaluate this offer to determine if the company should make or buy the component. Use the information included in the excel simulation and the excel functions described below to complete the task.

Answer 1

Without the excel simulation, the make-or-buy decision can be determined for Alanco, Inc. as follows:

                                           Make               Buy             Difference

Direct materials per unit    $4.00

Direct labor                          6.00

Variable manufacturing

 overhead                           2.00

Total variable costs        $12.00

Traceable fixed overhead 5.00

Total relevant costs       $17.00               $21.00            $4.00

Additional cost of buying the component parts = $4,800 ($4 x 1,200)

Thus, Alanco, Inc. should continue to make the parts, as it is more cost-effective than buying from the outside supplier.

What is a make-or-buy decision?

A make-or-buy decision is a financial decision that decides if a product or part should be manufactured in-house or bought from outside suppliers.

The making of a make-or-buy decision depends on the relevant costs.

Question Completion:

                                           Make               Buy

Direct materials per unit    $4.00

Direct labor                          6.00

Variable manufacturing

 overhead                           2.00

Total variable costs        $12.00

Traceable fixed overhead 5.00

Total                                $17.00

Fixed manufacturing

Common                          8.00

Total costs                    $25.00               $21.00

Thus, the make-or-buy decision shows that Alanco, Inc. should continue to make the part instead of buying from the outside supplier.

Learn more about the make-or-buy decision at https://brainly.com/question/16955734