A finished ACC-260 Topic 7 make-or-buy decision analysis example, comparing a supplier quote with the avoidable cost of making a part and showing which overhead stays in the plant either way. Searches like "acc 260 topic 7 assignment example", "acc260 topic 7 sample" and "acc-260 topic 7 example" land here.
What a finished ACC-260 Topic 7 make-or-buy decision analysis looks like
The finished analysis puts two numbers side by side and then corrects the obvious one. The accounting system reports that a bracket costs $18 to make, and a supplier offers it at $16, which appears to save $20,000 a year on the illustrative volume of 10,000. The example breaks the $18 down: $8 of materials, $4 of labor, $2 of variable overhead and $4 of allocated fixed overhead. Of that $4, only $1, a line supervisor's salary, disappears if production stops, and the remaining $3 covers plant costs that continue. The relevant cost of making is therefore $15, and buying would cost the company $10,000 a year rather than saving $20,000. The analysis names volume as the driver and states the annual quantity, 5,000 brackets, below which the answer would flip.
How an ACC-260 Topic 7 example is structured
The analysis travels from the reported cost to the relevant one before it decides anything. Its first lines pose the decision as a question, alongside the supplier's quote and the annual volume. A second part reproduces the full cost per bracket as the accounting system reports it. A third part sorts each component into avoidable and unavoidable, with one sentence apiece on why, and treats the supervisor's salary separately because it is fixed and still avoidable. A fourth part compares total relevant cost of making against total cost of buying at the stated volume, showing the arithmetic in a single table rather than in prose. A fifth part solves for the indifference volume. A sixth part lists the factors the figures leave out, supplier reliability and quality among them. The recommendation closes the analysis in one paragraph.
The reported cost shown in full
The $18 figure from the accounting system is reproduced line by line, because a reader needs to see exactly which pieces the analysis later removes.
Avoidable sorted from unavoidable
Each cost component is tagged by whether it disappears if production stops, which is not the same test as whether it is fixed or variable.
A fixed cost that still goes
The supervisor's salary is fixed with respect to volume and avoidable if the line closes, and the example keeps it in the comparison for that reason.
Totals compared at the real volume
Relevant cost of making and cost of buying are multiplied out at 10,000 brackets a year, so the recommendation rests on dollars rather than on rates.
The volume at which it flips
Below 5,000 brackets a year the supplier becomes cheaper, and naming that threshold tells a manager what change in demand would reopen the decision.
What the numbers leave out
Supplier reliability, quality control and any use for the freed floor space are listed with a sentence each, since none of them appears in the arithmetic.
Where marks go in ACC-260 Topic 7
Comparing the supplier's price with the full reported cost costs the most marks here, because it recommends buying on a saving that is not there. The allocated plant overhead is real money, but it is spent whether the bracket is made or bought, so charging it to the make option inflates that side. A subtler loss comes from removing every fixed cost at once, which throws out the supervisor's salary along with the rent and understates what making really costs. Analyses that compare per-item rates and never multiply by volume cannot find the threshold where the answer changes. Recommendations leading with reliability or quality, before the main comparison is even computed, have argued the soft factors first. Leaving the freed capacity unmentioned, when the scenario offers a use for it, drops an opportunity cost from the decision.
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ACC-260 Topic 7 questions, answered
How do I know whether a fixed cost is avoidable?
Ask whether it would stop if the activity stopped. A supervisor who runs only this line, a machine lease that can be canceled or a dedicated inspection contract usually would. Plant rent, the controller's salary and depreciation on shared equipment usually would not. When the scenario is silent, state the assumption you made, because the recommendation can turn on that single sentence.
Does the freed space ever change the answer?
Yes, whenever it has another use. If stopping production lets the company rent the space out or make a more profitable part there, that forgone income is an opportunity cost of continuing to make the bracket and belongs on the make side of the comparison. When the scenario offers no alternative use, say so in one sentence rather than leaving the reader to wonder.
Should qualitative factors ever override the numbers?
They can, and the analysis should say when. A supplier with a history of late deliveries, or a part central to product quality, may justify making in-house at a modest cost premium. The recommendation should still state that premium in dollars, so the manager knows the price of the qualitative preference instead of treating it as free.