Factor Co. can produce a unit of product for the following costs: Direct material $ 8.70...
Factor Co. can produce a unit of product for the following
costs:
| Direct material | $ | 8.70 | |
| Direct labor | 24.70 | ||
| Overhead | 43.50 | ||
| Total costs per unit | $ | 76.90 | |
An outside supplier offers to provide Factor with all the units it
needs at $44.45 per unit. If Factor buys from the supplier, the
company will still incur 70% of its overhead. Factor should choose
to:
Multiple Choice
-
Buy since the relevant cost to make it is $63.85.
-
Make since the relevant cost to make it is $46.45.
-
Buy since the relevant cost to make it is $46.45.
-
Make since the relevant cost to make it is $33.40.
-
Buy since the relevant cost to make it is $33.40.
Homework Answers
Relevant cost to make = Direct Material + Direct labor + (Overhead * 30%)
= $8.70 + $24.70 + ($43.50 * 30%) = $46.45
Purchase cost from outside supplier = $44.45
-
Buy since the relevant cost to make it is $46.45.
Add Answer to:
Factor Co. can produce a unit of product for the following
costs:
Direct material
$
8.70...
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