3) Differential analysis
Make | Buy | |
Direct material (59000*6.8) | 401200 | |
Direct labor (59000*5) | 295000 | |
variable overhead | 165200 | |
Fixed overhead | 28674 | |
Opportunity Cost | 70000 | |
Purchase cost (59000*16.56) | 977040 | |
Total relevant cost | 960074 | 977040 |
it will save = 16966
So answer is f) $16966
b) Indifference point
Manufacturing cost = Buying cost
14.60X+98674 = 16.56X
X1.96 = 98674
X = 50344
So answer is f) 50344
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