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Golfers, Inc. (GI) manufactures golf-related equipment including golf balls. This years expected production of golf...

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Accounting

Golfers, Inc. (GI) manufactures golf-related equipment including golf balls. This years expected production of golf balls is 100,000 packs (each consisting of four golf balls). Cost data are as follows: Per Pack 100,000 Packs Product costs directly traceable to balls: Direct materials $ 3.00 $ 300,000 Direct labour 1.20 120,000 Variable manufacturing overhead 0.15 15,000 Fixed manufacturing overhead 60,000 General allocated overhead 48,000 $ 543,000 The full cost of one pack of golf balls is $5.43. GI has received an offer from an outside supplier to supply any desired quantity of balls at a price of $5.85 per pack of four golf balls. The cost accounting department has provided the following information: The direct fixed manufacturing overhead is the cost of leasing the machine that stamps out the balls. The machine can produce a maximum of 500,000 balls per year. If the balls are bought, the machine will no longer be needed. No other costs will be affected. Required: 1. Prepare an analysis showing whether GI would be better off making or buying the balls at a projected volume of 100,000 packs (400,000 golf balls). (Round "Per Unit" answers to 2 decimal places.)

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