Question

The previous person answered this with the net to make at 189,000 and it was incorrect, if you know the correct answer for the "Total Relevant Cost to Make" please respond, as it is not 189,000

Exercise 8-10 Every year Ayayai Industries manufactures 7,900 units of part 231 for use in its production cycle. The per unit costs of part 231 are as follows: Direct materials $3 Direct labor 11 Variable manufacturing overhead 6 Fixed manufacturing overhead 10 Total $30 Flintrock, Inc., has offered to sell 7,900 units of part 2311 to Ayayai for $33 per unit. If Ayayai accepts Flintrock's offer, its freed-up facilities could be used to earn $11,000 in contribution margin by manufacturing part 240. In addition, Ayayai would eliminate 40% of the fixed overhead applied to part 231. (a) Calculate total relevant cost to make and net cost to buy. Total relevant cost to make Net relevant cost to buy (b) Should Ayayai accept Flintrock's offer? Open Show Work Click if you would like to Show Work for this question:

Answer 1

Answer is given below

Working note Make Buy Direct Material Direct Labor Variable Manufacturing Overhead Fixed Manufacturing Overhead Cost to Buy Total Relevant Cost Less: Contribution margin by freeing up facility for Part 240 Net Relevant Cost $23,700 $86,900 $47,400 $79,000 $47,400 $260,700 $308,100 $237,000 $11,000 $297,100 $237,000 $237,000 Relevant cost to Make a) $297,100 Relevant Cost to Buy b) Ayayai should not accept Flintrock's offers since Buying cost is higher than make cost