| Course | AC499 Bachelor's Capstone in Accounting |
|---|---|
| Unit | Unit 4 |
| Paper type | Costing decision analysis |
| Length | About 620 words, 5 pages double-spaced |
| Format | APA 7 student paper |
| School | Purdue University Global |
| Program | BS in Accounting |
| Updated | October 2026 |
Free sample paper for AC499 Unit 4
A Second Profiling Line or an Outside Mill? A Unit 4 Capstone Costing Decision on 800 Peak Stave Sets
[Student Name]
Purdue University Global
AC499: Bachelor's Capstone in Accounting
Unit 4 Costing Decision Analysis
[Instructor Name]
[Date]
Kettle Hollow Sauna Works, the outside mill and every figure are composite; the textbooks and survey cited are real.
Exhibit A: Which Costs Are Relevant
The Unit 3 cost card gives a standard cost of $1,180 per stave set: cedar $780, milling labor $120, variable overhead $70 and absorbed fixed overhead $210. A make-or-buy comparison counts only the costs that would change with the choice (Datar & Rajan, 2021). Cedar, milling labor and variable overhead would be spent only if the company mills the extra sets itself, so they are relevant, $970 a set in all. The $210 of fixed overhead covers plant rent, the existing line and supervision, which the company pays whichever option it chooses, so it stays out of the comparison.
The second line also brings new fixed costs that exist only if it is bought: $21,000 a year of maintenance and $31,000 for a second-shift lead, $52,000 in all. These are relevant.
Exhibit B: Annual Cost of Each Option for 800 Sets
Milling in-house costs 800 sets at $970, which is $776,000, plus the $52,000 of added fixed cost, for $828,000 a year. Buying from the outside mill costs 800 sets at $1,095 plus $45 of freight, $1,140 delivered, for $912,000 a year. In-house milling is cheaper by $84,000 a year before tax.
The $210 of absorbed fixed overhead is the number that most often flips this decision on paper, because adding it makes in-house milling look like $1,180 a set against $1,140, when the company pays that overhead whichever way it decides.
Exhibit C: The Investment
The second line requires $380,000 up front. At $84,000 of annual savings, simple payback is 4.5 years. Over a ten-year life with no salvage value and a 9 percent discount rate, taken from the case file's stated borrowing cost plus the margin it supplies, the annuity factor is 6.4177. The present value of the savings is $539,083, and the net present value before tax is $159,083. Net present value is the method most chief financial officers report using for decisions of this kind (Graham & Harvey, 2001).
Break-Even Volume
The annual equivalent cost of the $380,000 investment at 9 percent over ten years is $59,212. Adding the $52,000 of new fixed costs gives $111,212 a year that the second line must recover. Each set milled in-house rather than bought saves $170, the difference between $1,140 and $970. The line pays for itself while peak volume above current capacity stays above 654 sets a year. The case forecast of 800 sets clears that by 146 sets, or 18 percent.
Qualitative Factors
Three factors sit outside the numbers. The first is quality: the outside mill's reject rate was requested in the scoping plan and not supplied, so the analysis cannot price it. A reject rate would raise the cost of buying, which would strengthen the in-house case. The second is capacity risk: if demand fell below 654 extra sets, the line would lose money, while the outside mill could simply be ordered from less. The third is cedar supply, since a second line commits the company to buying more cedar from a single supplier whose price rose 18 percent this year.
Recommendation
Mill the extra sets in-house and buy the second profiling line, subject to the tax effect in Unit 5 and any change to the labor rate the Unit 6 control work may produce. The decision rests on the relevant cost, not the full standard cost (Horngren et al., 2014).
References
Datar, S. M., & Rajan, M. V. (2021). Horngren's cost accounting: A managerial emphasis (17th ed.). Pearson.
Graham, J. R., & Harvey, C. R. (2001). The theory and practice of corporate finance: Evidence from the field. Journal of Financial Economics, 60(2-3), 187-243. https://doi.org/10.1016/S0304-405X(01)00044-7
Horngren, C. T., Sundem, G. L., Schatzberg, J. O., & Burgstahler, D. (2014). Introduction to management accounting (16th ed.). Pearson.
Reading the AC 499 Unit 4 instructions
Unit 4 of AC499 asks you to analyze a make-or-buy or capacity decision using the cost card from your earlier work. Sort the standard cost into relevant and irrelevant parts, explaining why fixed overhead that continues either way is excluded. Identify new fixed costs that arise only with one option. Compare the annual cost of each option at the expected volume. If the decision requires investment, work out payback and discounted value, naming the rate and the asset's life. Find the break-even volume, including recovery of the investment. Discuss qualitative factors the numbers miss, such as quality, capacity risk and supplier dependence. Close with a recommendation and note any later unit that could change it. Cite cost accounting texts and evidence on capital budgeting practice in APA 7.
How the AC 499 Unit 4 example is put together
Exhibit A in the sample splits the $1,180 standard stave set into $970 of relevant cost and $210 of fixed overhead that stays behind, then adds $52,000 of new fixed cost for maintenance and a second-shift lead. Exhibit B prices 800 sets at $828,000 in-house against $912,000 from the outside mill. The highlighted sentence explains how absorbed overhead can flip the answer on paper. Exhibit C computes a 4.5-year payback and a net present value of $159,083 using a 6.4177 annuity factor, citing Graham and Harvey. Break-even volume of 654 sets follows from a $59,212 annual equivalent cost. Quality, capacity and cedar supply are weighed as qualitative factors, and the recommendation is held open for Units 5 and 6.
Where the points sit in the AC499 Unit 4 rubric
AC499 costing analyses earn points for correct identification of relevant costs. Graders look first at whether fixed overhead that does not change with the decision has been excluded, since including it is the most common error. New fixed costs that arise with one option must be included. The rubric rewards clean exhibits that let a reader follow each figure, an investment analysis with a stated rate and life, and a break-even volume that includes capital recovery. Qualitative factors should be specific to the case, not generic. A recommendation that acknowledges which later findings could change it shows integration. APA 7 citations to cost accounting sources support the method.
Common AC499 Unit 4 mistakes, and how to avoid them
Many Unit 4 analyses compare full standard cost with the supplier's price, which makes buying look cheaper than it is. Others forget the new costs the investment brings, such as maintenance or added supervision. Payback is reported without net present value, or net present value without stating the rate. Break-even is computed on operating savings alone, ignoring the investment. Quality is assumed equal without saying the data is missing. Recommendations are final even though later units may change the labor rate. If your section's case involves a different capacity decision or supplier quote, our writers can sort your cost card and build the exhibits from your figures.
Get an AC499 Unit 4 example written to your instructions
Share the cost data and supplier quotes in your case, your Unit 3 figures and the Unit 4 prompt with its rubric. Only the costs that differ between options enter the analysis, each reconciled to what you already submitted, with break-even volume shown. It comes free as a first sample, usually inside 24-48h. The paper above is an original model document written by our desk, not a submitted student paper and not an official Purdue University Global document.
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AC499 Unit 4 questions, answered
What discount rate does the sample use, and where does it come from?
Nine percent, taken from the case file's stated borrowing cost plus the margin the case supplies. Where a section gives no rate, the sample states its assumption and shows how the NPV moves one point either side, since a thin result like 70,309 is sensitive to it. Whatever rate appears here has to reappear unchanged in the integrated report.
Where can I find a free AC499 Unit 4 sample paper?
This page holds a full AC499 Unit 4 costing decision analysis for Kettle Hollow Sauna Works comparing a second profiling line with an outside mill, with relevant costs, net present value, break-even volume and APA 7 references.
Why is fixed overhead excluded from the in-house cost?
Because the company pays it whichever option it picks. The $210 of absorbed overhead per stave set covers rent, the existing line and supervision, so adding it would make milling look like $1,180 a set against $1,140 when the real comparison is $970.
Does the analysis consider quality risk?
Yes, as a qualitative factor, because the outside mill's reject rate was requested in the scoping plan and never supplied. Any reject rate would raise the cost of buying, so the missing figure could only strengthen the in-house case.
Where does the 9 percent discount rate come from?
From the case file's stated borrowing cost plus the margin it supplies. Where a section gives no rate, state the assumption and show how the net present value moves at a rate two points higher.