单选题 Sam Company Ltd. produces a range of products and absorbs production overhead using a rate of 168% on direct wages. The absorption rate was calculated from following budgeted figures: ＄ Direct wages 100,000 Fixed production overhead 90,000 Variable production overhead 78,000 Sam is making component W, which is an essential part of product M. The cost of making component W is as follows: ＄ Raw material 10 Direct wages 8 Production overhead 18 36 It is found that component W could be bought from an outside supplier at ＄21. It is unlikely to reduce any production costs even if component W is acquired from outside. Required: (a)Determine the overhead absorption rate. (b)Advise whether the company should continue making component W or buy it from outside.

【正确答案】

【答案解析】(a)The overhead absorption rates are determined as follows: Variable overhead rate = Variable production costs / Direct labour costs = 78,000 / 100,000 = 78% Fixed rate overhead = Fixed production costs / Direct labour costs = 90,000 / 100,000 = 90% Total rate = 78% + 90% = 168% (b)Marginal cost for unit of component W: ＄ Raw material 10 Direct labour 8 Variable overhead (＄8×78%) 6.24 24.24 The outside supplier's quotation of ＄21 is lower as compared with the variable cost of making component W. Thus, buying component W from outside would save ＄3.24 per unit and is recommended.