Answer-
Total Incremental cost to making 40000 units | |||
Particulars | Relevant amount per unit | Relevant fixed costs | Total Relevant costs |
$ | |||
Variable cost per unit | $6.25 | $6.25*40000 units=250000 | |
Fixed manufacturing costs | $77000-$65500=$11500 | 11500 | |
Total incremental cost to make | 261500 |
Total Incremental cost to buying 40000 units | |||
Particulars | Relevant amount per unit | Relevant fixed costs | Total Relevant costs |
Purchase price per unit | $3.50 | $3.50*40000 units=140000 | |
Total incremental cost to buy | 140000 |
The company should manufacture the component due to least cost in making such unit comparing buying from outside supplier.
Inc Costs to Inc Costs to Make Buy Calculate the total incremental cost of buying 40,000...
Gelb Company currently manufactures 40,000 units per year of a key component for its manufacturing process. Variable costs are $6.25 per unit, fixed costs related to making this component are $77,000 per year, and allocated fixed costs are $65,500 per year. The allocated fixed costs are unavoidable whether the company makes or buys this component. The company is considering buying this component from a supplier for $3.50 per unit. Calculate the total incremental cost of making and buying 40,000 units....
Gelb Company currently manufactures 40,000 units per year of a key component for its manufacturing process. Variable costs are $6.25 per unit, fixed costs related to making this component are $77,000 per year, and allocated fixed costs are $65,500 per year. The allocated fixed costs are unavoidable whether the company makes or buys this component. The company is considering buying this component from a supplier for $3.50 per unit. Calculate the total incremental cost of making and buying 40,000 units....
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