MANAGERIAL ACCOUNTING · Web view5.00 1.00 3.00 2.00 10.00 $30.00 Sheet1 Cost Per Unit Cost of 20,000 Units Make Buy Outside purchase price Direct materials Direct labor Variable

MANAGERIAL ACCOUNTING

Managerial Accounting

Business Decision Making

MANAGERIAL ACCOUNTING

CHAPTER – 4

BUSINESS DECISION MAKING

a. Introduction

b. Cost concepts for decision making

c. Meaning of relevance

I. Relevant costs

II. Relevant revenues

d. Irrelevant costs

e. Special sales orders

f. Adding and dropping products

g. Outsourcing and Make-versus-Buy decisions

h. Sell or process further decisions

Introduction:

The main financial goals in business are to earn a profit and to have a strong financial position. Decision centre on how to achieve these goals.

Central idea: Managers often must choose between alternative courses of actions in their decision-making. Consequently, they are usually interested in all differences between alternatives, including financial and non-financial ones. The discussion focuses on financial decisions involving costs and revenues and a process called relevant-cost analysis that allows the manager to compare one alternative to another.

In general, it is understood that managers have more control over their contribution margin than their fixed costs. That is, they are more able to alter their sales prices, sales volume, and variable costs (i.e., increasing/decreasing sales prices, producing and selling more/less products, changing vendors for raw materials, etc.) than alter their fixed costs. This is not to say that fixed costs cannot be altered. It is just to say that the contribution margin is more controllable. We look at cases where managers must consider whether or not to accept special orders, whether to discontinue/continue particular services, how to price products and services, among other things.

When making comparisons among alternative actions, you are expected to identify all costs and revenues that differ between the alternatives, and, thus, based upon your analysis of these differences, choose the alternative that gives the best bottom line (i.e., operating profit).

A decision model is a formal method for making a choice, often involving quantitative and qualitative analysis. A decision model is any method used for making a choice, sometimes requiring elaborate quantitative procedures.

Five-Step Decision-Making Process

Cost Concepts for Decision-Making.

Every decision involves a choice from among at least two alternatives. The costs and benefits of the alternatives should be compared when making the decision.

Identifying relevant costs.

a. Relevant cost or benefit is a cost or benefit that differs between alternatives. Differential costs are relevant costs. Any cost or benefit that does not differ between alternatives is irrelevant and can be ignored in a decision. This is a tremendously powerful concept that allows us to ignore mounds of data when making decisions since most things are not affected by any given decision.

b. Costs that can be eliminated (in whole or in part) by choosing one alternative over another are avoidable costs. Avoidable costs are relevant costs.

c. When making a decision, eliminate all irrelevant costs. Make the decision based on the remaining, relevant costs.

Unavoidable costs are never relevant and include:

· Sunk costs.

· Future costs that do not differ between the alternatives.

2. Different costs for different purposes. Costs that are relevant in one decision situation are not necessarily relevant in another. In each situation the manager must examine the data and isolate the relevant costs.

3. Human frailties. Many (most?) people have a great deal of difficulty ignoring irrelevant costs when making decisions. People are especially reluctant to discard sunk costs in decision-making when the sunk costs are a consequence of a past decision that in retrospect was unwise. People have a tendency to become committed to courses of action that have not worked out. Taking a loss on an asset is an admission of failure.

The Meaning of Relevance

Relevant costs and relevant revenues are expected future costs and revenues that differ among alternative courses of action.

· Relevant Information has two characteristics:

Comparative Income Approach

Solution

Keep

Digital

Watches

Drop

Digital

Watches Difference

Sales500,000$ -$ (500,000)$

Less variable expenses:-

Manufacturing expenses120,000 - 120,000

Shipping5,000 - 5,000

Commissions75,000 - 75,000

Total variable expenses200,000 - 200,000

Contribution margin300,000 - (300,000)

Less fixed expenses:

General factory overhead60,000 60,000 -

Salary of line manager90,000 - 90,000

Depreciation50,000 50,000 -

Advertising - direct100,000 - 100,000

Rent - factory space70,000 - 70,000

General admin. expenses30,000 30,000 -

Total fixed expenses400,000 140,000 260,000

Net operating loss

(100,000)$ (140,000)$ (40,000)$

· It occurs in the future

· It differs among the alternative courses of action

· Relevant Costs – expected future costs

· Relevant Revenues – expected future revenues

A relevant cost is a cost that differs between alternatives.

SPECIAL SALES ORDERS

A special order is a one-time order that is not considered part of the company’s normal ongoing business.

Special Order. Special orders are one-time orders that do not affect a company's normal sales. The profit from a special order equals the incremental revenue less the incremental costs. As long as the incremental revenue exceeds the incremental costs, the order should be accepted.

When analyzing a special order, only the incremental costs and benefits are relevant.

Case study : 1

· Gabriela & Co. manufactures fancy bath towels in Boone, North Carolina.

· The plant has a production capacity of 44,000 towels each month.

· Current monthly production is 30,000 towels.

· The assumption is made that costs can be classified as either variable with respect to units of output or fixed.

Variable costs Fixed costs

Per Unit Per Unit

Direct materials

$6.50

$ -0-

Direct labor

.50 1.50

Manufacturing costs

1.50 3.50

Total

$8.50 $5.00

· Total fixed direct manufacturing labor amounts to $45,000.

· Total fixed overhead is $105,000.

· Marketing costs per unit are $7 ($5 of which is variable).

· What is the full cost per towel?

· Variable ($8.50 + $5.00):

$13.50

· Fixed:

7.00

· Total

$20.50

· A hotel in Puerto Rico has offered to buy 5,000 towels from Gabriela & Co. at $11.50 per towel for a total of $57,500.

· No marketing costs will be incurred for this one-time-only special order.

· Should Gabriela & Co. accept this order?

· Yes!

· Why?

·

· The relevant costs of making the towels are $42,500.

· $8.50 × 5,000 = $42,500 incremental costs

· $57,500 – $42,500 = $15,000 incremental income

· $11.50 – $8.50 = $3.00 contribution margin per towel

· Decision criteria: Accept the order if the revenue differential is greater than the cost differential.

Case study - 2

· Jet, Inc. makes a single product whose normal selling price is $20 per unit.

· A foreign distributor offers to purchase 3,000 units for $10 per unit.

· This is a one-time order that would not affect the company’s regular business.

· Annual capacity is 10,000 units, but Jet, Inc. is currently producing and selling only 5,000 units.

· Should Jet accept the offer?

Step

1

:

Obtain

Information

Step

5

:

Evaluate

Performance

Step

4

:

Implement

The

Decision

Step

3

:

Choose

An

Alternative

Step

2

:

Make

Predictions

About

Future

Costs

Feedback

Jet, Inc.

Contribution Income Statement

Revenue (5,000 × $20)100,000$

Variable costs:

Direct materials20,000$

Direct labor5,000

Manufacturing overhead10,000

Marketing costs5,000

Total variable costs40,000

Contribution margin60,000

Fixed costs:

Manufacturing overhead28,000$


Total fixed costs48,000

Net operating income

12,000$

Note: This answer assumes that fixed costs are unaffected by the order and that variable marketing costs must be incurred on the special order

If Jet accepts the special order, the incremental revenue of $30,000 will exceed the incremental costs of $24,000 by $6,000. This suggests that Jet should accept the order. Notice that this answer assumes that the fixed costs are unavoidable and that variable marketing costs must be incurred on the special order.

ADDING / DROPPING PRODUCTS

One of the most important decisions managers make is whether to add or drop a business segment, such as a product or a store.

B. Adding or Dropping a Segment. Decisions relating to dropping old products (or segments) and adding new products (or segments) are among the most difficult that a manager makes. Two basic approaches can be used to analyze data in this type of decision.

1. Compare contribution margins and fixed costs. A segment should be added only if the increase in total contribution margin is greater than the increase in fixed cost. A segment should be dropped only if the decrease in total contribution margin is less than the decrease in fixed cost.

2. Compare net incomes. A second approach is to calculate the total net income under each alternative. The alternative with the highest net income is preferred. This approach requires more information than the first approach since costs and revenues that don't differ between the alternatives must be included in the analysis when the net incomes are compared.

3. Beware of allocated common costs. Allocated common costs can make a segment look unprofitable even though dropping the segment might result in a decrease in overall company net operating income. Allocated costs that would not be affected by a decision are irrelevant and should be ignored in a decision relating to adding or dropping a segment.

Case study :

Due to the declining popularity of digital watches, Lovell Company’s digital watch line has not reported a profit for several years. Lovell is considering dropping this product line.

Increase in revenue (3,000 × $10)30,000$

Increase in costs (3,000 × $8 variable cost) 24,000

Increase in net income

6,000$

DECISION RULE

Lovell should drop the digital watch segment only if its profit would increase. This would only happen if the fixed cost savings exceed the lost contribution margin.

Investigation has revealed that total fixed general factory overhead and general

administrative expenses would not be affected if the digital watch line is dropped. The fixed general factory overhead and general administrative expenses assigned to this product would be reallocated to other product lines.

The equipment used to manufacture digital watches has no resale value or alternative use.

Should Lovell retain or drop the digital watch segment?

Segment Income Statement

Digital Watches

Sales500,000$

Less: variable expenses

Variable manufacturing costs120,000$

Variable shipping costs5,000

Commissions75,000 200,000

Contribution margin300,000$

Less: fixed expenses

General factory overhead60,000$

Salary of line manager90,000

Depreciation of equipment50,000

Advertising - direct100,000

Rent - factory space70,000

General admin. expenses30,000 400,000

Net operating loss

(100,000)$

A contribution margin approach reveals that the contribution margin lost ($300,000) exceeds the fixed costs avoided ($260,000) by $40,000. Therefore, Lovell should retain the digital watch segment.

Contribution Margin

Solution

Contribution margin lost if digital

watches are dropped(300,000)$

Less fixed costs that can be avoided

Salary of the line manager90,000$


Rent - factory space70,000 260,000

Net disadvantage

(40,000)$

OUTSOURCING AND MAKE - versus – BUY

· In sourcing – producing goods or services within an organization

· Outsourcing – purchasing goods or services from outside vendors

· Also called the “Make or Buy” decision

· Decision Rule: Select the option that will provide the firm with the lowest cost, and therefore the highest profit.

The Make or Buy Decision. A make or buy decision is concerned with whether an item should be made internally or purchased from an external supplier.

When a company is involved in more than one activity in the entire value chain, it is vertically integrated. A decision to carry out one of the activities in the value chain internally, rather than to buy externally from a supplier is called a “make or buy” decision.

1. Advantages of making an item internally.

a. Producing a part internally reduces dependence on suppliers and may ensure a smoother flow of parts and material for production.

b. Quality control may be easier when parts are produced internally.

c. Profits can be realized on the parts and materials.

2. Advantages of buying an item from an external supplier.

a. By pooling the requirements of a number of users, a supplier can realize economies of scale and may be able to move more quickly up the learning curve.

b. A specialized supplier may be able to respond more quickly and at less cost to changing future needs.

c. Changing technology may make producing one's own parts riskier than purchasing from the outside.

3. Opportunity Cost. Opportunity costs should be considered in decisions. There is no opportunity cost involved in using a resource that has excess capacity. However, if the resource is a constraint (i.e., there is no excess capacity) then there is an opportunity cost. The opportunity costs may be far more important than the costs typically recorded in accounting systems.

Case study

The Make or Buy Decision: An Example

· Essex Company manufactures part 4A that is used in one of its products.

·


Solution

Keep

Digital

Watches

Drop

Digital

Watches Difference

Sales500,000$ -$ (500,000)$

Less variable expenses:-

Manufacturing expenses120,000 - 120,000

Shipping5,000 - 5,000

Commissions75,000 - 75,000

Total variable expenses200,000 - 200,000

Contribution margin300,000 - (300,000)


General factory overhead60,000 60,000 -

Salary of line manager90,000 - 90,000

Depreciation50,000 50,000 -

Advertising - direct100,000 - 100,000

Rent - factory space70,000 - 70,000

General admin. expenses30,000 30,000 -

Total fixed expenses400,000 140,000 260,000

Net operating loss

(100,000)$ (140,000)$ (40,000)$

The unit product cost of this part is:

The Make or Buy Decision

· The special equipment used to manufacture part 4A has no resale value.

· The total amount of general factory overhead, which is allocated on the basis of direct labor hours, would be unaffected by this decision.

· The $30 unit product cost is based on 20,000 parts produced each year.

· An outside supplier has offered to provide the 20,000 parts at a cost of $25 per part.

Should we accept the supplier’s offer?

Direct materials $ 9

Direct labor 5

Variable overhead1

Depreciation of special equip.3

Supervisor's salary2

General factory overhead10

Unit product cost

30$

The avoidable costs associated with making part 4A include direct materials, direct labor, variable overhead, and the supervisor’s salary.

The total avoidable costs of $340,000 are less than the $500,000 cost of buying the part, thereby suggesting that Essex should continue to make the part.

SELL OR PROCESS FURTHER DECISIONS

Sell or process further decisions: A decision often must be made about selling a joint product as is or processing it further.

a. It is profitable to continue processing a joint product after the split-off point so long as the incremental revenue from such processing exceeds the incremental processing costs.

b. In such decisions, the joint product costs incurred before the split-off point are not relevant. They would be relevant in a decision to shut down the joint process altogether, but they are irrelevant in any decision about what to do with the joint products once they have reached the split-off point.

· In some industries, a number of end products are produced from a single raw material input.

· Two or more products produced from a common input are called joint products.

· The point in the manufacturing process where each joint product can be recognized as a separate product is called the split-off point.

Joint costs are irrelevant in decisions regarding what to do with a product from the split-off point forward.It will always be profitable to continue processing a joint product after the split-off point so long as the incremental revenue exceeds the incremental processing costs incurred after the split-off point.

Sell or Process Further: An Example case study

· Sawmill, Inc. cuts logs from which unfinished lumber and sawdust are the immediate joint products.

· Unfinished lumber is sold “as is” or processed further into finished lumber.

· Sawdust can also be sold “as is” to gardening wholesalers or processed further into “presto-logs.”

Data about Sawmill’s joint products includes

Sawmill has two joint products – lumber and sawdust. Selected financial information is shown for each joint product.

Cost

Per

Unit

Cost of 20,000 Units

Make

Buy

Outside purchase price $ 25 $ 500,000

Direct materials9$ 180,000

Direct labor5 100,000

Variable overhead1 20,000

Depreciation of equip.3 -

Supervisor's salary2 40,000

General factory overhead10 -

Total cost

30$ 340,000$ 500,000$

Per Log

Lumber Sawdust

Sales value at the split-off point140$ 40$

Sales value after further processing270 50

Allocated joint product costs176 24

Cost of further processing50 20

Analysis of Sell or Process Further

Per Log

Lumber Sawdust

Sales value after further processing270$ 50$

Sales value at the split-off point140 40

Incremental revenue130 10


Profit (loss) from further processing

80$ (10)$

The incremental revenue from further processing of the lumber and sawdust is $130 and $10, respectively.

The profit (loss) from further processing is $80 for the lumber and negative $10 for the sawdust.

Should we process the lumber further and sell the sawdust “as is?”

The lumber should be processed further and the sawdust should be sold at the split-off point.

PROBLEMS

1. AC Delco, a manufacturer of automobile parts, ordinarily sells oil filters for $3.20 each. Assume that a mil-order company has offered AC Delco $35,000 for 20,000 oil filters or $1.75 per filter. This sale will not affect regular business in anyway. Further more, the special sales order :

► will not change fixed costs.

► will not require any additional variable marketing and administrative expenses

► will put to use idle manufacturing capacity.

Assume that AC Delco’s variable marketing cost is $1.20per oil filter.

Income statement (CM format)

Sales Revenue

$800,000

Less: Variable expenses

Manufacturing $300,000

Marketing & adm. 75,000 375,000

Contribution margin

425,000

Less: Fixed expenses

Manufacturing

$200,000

Mark. & adm. 125,000 325,000

Operative Income

$100,000

AC Delco made and sold 25,000 oil filters before considering the special sales order. Should AC Delco accept the special order at a sale price of $1.75? How would this special sales affect the company’s operative income?

2. Consider the AC Delco special sales order problem (above) suppose that:

a) AC Delco’s variable manufacturing cost is $1.35 per oil filter (instead of $1.20)

b) AC Delco would have to buy a special stamping machine that costs $900 to mark the customer’s logo on the special order oil filters. The machine would be scrapped when the special order is complete.

Under the incremental analysis approach to determine whether you would recommend that AC Delco accept the special order under these conditions.

3. Daniel Green Bed room slippers sell for about $30 per pain. Suppose that the company incurs the following average costs per pair:

Direct materials

$10

Direct labor

3

Variable Manufacturing O/H 2

Variable marketing expenses 1

Fixed manufacturing O/H 5

Total Costs

$21

Total fixed manufacturing overhead $500,000. The company made 100,000 pairs of shippers

Green has enough idle capacity to accept one-time only special order from Berk Department store for 20,000 pairs of shippers at $19 per pair. Green will not incur any additional variable marketing expense for the order.

How would accepting the special order affect Green’s operating income?

4. Consider the Daniel Green company above. In addition to the special order’s effect on profits, what other (long term) factors should Daniel Green’s managers consider in deciding whether to accept Belk’s special order?

5. In continuation of problem No. 1: Assume that AC Delco already operating at 270,000 unit level. The company is now considering dropping the air cleaner product line with $35,000 per unit of E1.20. Should AC Delco drop the air cleaner product?

6. AC Delco’s production process uses part No.4 which has the following (assumed) manufacturing costs for 250,000 parts.

Part No.4 costs

Total cost (250,000 units)

Direct materials

$40,000

Direct labor

20,000

Variable overhead

15,000

Fixed overhead 50,000

Total manufacturing cost $125,000

Cost per unit (125000/250000) $0.50

Fran, another company offers to sell AC Delco the same part for $0.37 per unit Assume that AC Delco reduces its fixed overhead cost by $10,000. Should AC Delco make a part No 4 or buy it from Fran.

7. Folsam Electrical components have been purchasing electric switches for $3 each. Folsam believes that it can make these switches using its excess capacity. No extra equipment or other fixed cost would be required. Folsam estimates that it will need 50,000 switches and that the cost per switch would include the following:

Direct materials

$1.25

Direct labor

0.80

Variable manufacturing O/H

0.50

Fixed manufacturing O/H

0.75

Total average cost per switch 3.30

Should Folsam make or buy the switches?

8. In continuation of problem No.6 (AC Delco) buying part No.4 from an outside supplier will release factory facilities that AC Delco can use to manufacture gasoline filters. Assume the expected annual profit from the Gasoline filters is $18,000. AC Delco managers must decide among three alternatives:

a) Use the facilities to make part No.4.

b) Buy part No.4 and leave facilities idle.

c) Buy part No.4 and use facilities to make gasoline filters.

9. Cherron Oil Company spent $48,000 to produce 50,000 gallons of regular gasoline. Assume Cherron can sell this regular gasoline for $1.20 per gallon, for a total of $60,000. Alternatively, Cherron could further process this regular gasoline into premium – grade gas. Suppose the additional cost to process the gas further is $0.11 per gallon for an additional cost of $5,500 (for 50,000 gallons). Assume the sale price of premium gasoline is $1.40 per gallon tor a total of $70,000.

Should a regular gasoline be sold as it is or should the regular gasoline be processed further into premium gasoline?

10. Toshiba has the following manufacturing costs for 20,000 of its television cabinets:

Direct materials

$20,000

Direct labor

80,000

Variable Overhead

40,000

Fixed overhead

80,000

Total Manuf. Cost $220,000

Cost per cabinet (22,000/20,000) = $11

Another manufacturer has offered to sell Toshiba similar cabinets for $10, a total purchase cost of $200,000. By purchasing the cabinets outside, Toshiba can save $50,000 of fixed overhead cost. The realized facilities can be used to manufacture other products that will contribute $60,000 to profits. Identify and analyze the alternatives. What is Toshiba’s best course of action?

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PAGE

13

Faculty : Dr. Uvesh Husain

Mazoon University College


Per Log

Lumber Sawdust




Jet, Inc.


Revenue (5,000 × $20)100,000$

Variable costs:

Direct materials20,000$

Direct labor5,000





Fixed costs:

Manufacturing overhead28,000$



Net operating income

12,000$

Increase in revenue (3,000 × $10)30,000$

Increase in costs (3,000 × $8 variable cost) 24,000

Increase in net income

6,000$

Step

1

:

Obtain

Information

Step

5

:

Evaluate

Performance

Step

4

:

Implement

The

Decision

Step

3

:

Choose

An

Alternative

Step

2

:

Make

Predictions

About

Future

Costs

Feedback

Direct materials $ 9

Direct labor 5

Variable overhead1




Unit product cost

30$

Cost

Per

Unit

Cost of 20,000 Units

Make

Buy

Outside purchase price $ 25 $ 500,000

Direct materials9$ 180,000

Direct labor5 100,000

Variable overhead1 20,000

Depreciation of equip.3 -

Supervisor's salary2 40,000

General factory overhead10 -

Total cost

30$ 340,000$ 500,000$

Per Log

Lumber Sawdust

Sales value at the split-off point140$ 40$

Sales value after further processing270 50

Allocated joint product costs176 24



Per Log

Lumber Sawdust





Per Log

Lumber Sawdust





Profit (loss) from further processing

80$ (10)$

Contribution Margin

Solution

Contribution margin lost if digital

watches are dropped(300,000)$


Salary of the line manager90,000$


Rent - factory space70,000 260,000

Net disadvantage

(40,000)$


Digital Watches

Sales500,000$


Variable manufacturing costs120,000$


Commissions75,000 200,000

Contribution margin300,000$


General factory overhead60,000$





General admin. expenses30,000 400,000

Net operating loss

(100,000)$

_1276619072.xls

Sheet1

Direct materials$ 9

Direct labor5

Variable overhead1




Unit product cost$ 30

&A

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_1276702738.xls

Sheet1


Digital Watches

Sales$ 500,000


Variable manufacturing costs$ 120,000


Commissions75,000200,000

Contribution margin$ 300,000


General factory overhead$ 60,000





General admin. expenses30,000400,000

Net operating loss$ (100,000)

&A

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_1276865947.xls

Sheet1

Contribution Margin

Solution

Contribution margin lost if digital watches are dropped$ (300,000)


Salary of the line manager$ 90,000


Rent - factory space70,000260,000

Net disadvantage$ (40,000)


General factory overhead$ 60,000





General admin. expenses30,000400,000

Net loss$ (440,000)

&A

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Sheet1


Solution

Keep Digital WatchesDrop Digital WatchesDifference

Sales$ 500,000$ - 0$ (500,000)

Less variable expenses:- 0

Manufacturing expenses120,000- 0120,000

Shipping5,000- 05,000

Commissions75,000- 075,000

Total variable expenses200,000- 0200,000

Contribution margin300,000- 0(300,000)


General factory overhead60,00060,000- 0

Salary of line manager90,000- 090,000

Depreciation50,00050,000- 0

Advertising - direct100,000- 0100,000

Rent - factory space70,000- 070,000

General admin. expenses30,00030,000- 0

Total fixed expenses400,000140,000260,000

Net operating loss$ (100,000)$ (140,000)$ (40,000)

&A

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_1276620240.xls

Sheet1


Per Log

LumberSawdust

Sales value after further processing$ 270$ 50

Sales value at the split-off point14040

Incremental revenue13010

&A

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_1276620331.xls

Sheet1


Per Log

LumberSawdust

Sales value after further processing$ 270$ 50

Sales value at the split-off point14040

Incremental revenue13010

Cost of further processing5020

Profit (loss) from further processing$ 80$ (10)

&A

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_1276620175.xls

Sheet1

Per Log

LumberSawdust

Sales value at the split-off point$ 140$ 40

Sales value after further processing27050

Allocated joint product costs17624

Cost of further processing5020

&A

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_1276619131.xls

Sheet1

Cost Per UnitCost of 20,000 Units

MakeBuy

Outside purchase price$ 25$ 500,000

Direct materials$ 9180,000

Direct labor5100,000

Variable overhead120,000

Depreciation of equip.3- 0

Supervisor's salary240,000

General factory overhead10- 0

Total cost$ 30$ 340,000$ 500,000

&A

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_1276539975.xls

Sheet1

Increase in revenue (3,000 × $10)$ 30,000

Increase in costs (3,000 × $8 variable cost)24,000

Increase in net income$ 6,000

&A

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_1276616267.vsd
Step 1:ObtainInformation

Step 5:EvaluatePerformance

Step 4:ImplementTheDecision

Step 3:ChooseAnAlternative

Step 2:MakePredictionsAboutFutureCosts

Feedback

_1276539879.xls

Sheet1

Jet, Inc.


Revenue (5,000 × $20)$ 100,000

Variable costs:

Direct materials$ 20,000

Direct labor5,000





Fixed costs:

Manufacturing overhead$ 28,000



Net operating income$ 12,000

&A

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Documents

MANAGERIAL ACCOUNTING · Web view5.00 1.00 3.00 2.00 10.00 $30.00 Sheet1 Cost Per Unit Cost of 20,000 Units Make Buy Outside purchase price Direct materials Direct labor Variable