Question

GREG SAVED $61,200 WHEN OUTSOURCING 28,800 UNITS. GREG SAVED $74,400 WHEN HE OUTSOURCED 26,600 UNITS. WHAT IS GREG'S INSIDE VC/UNIT IF THE OUTSIDE VC/UNIT = $27. INSIDE VC/UNIT 3400 13200 BONUS (1 POINT) BREAK EVEN UNITS ณ •

Answer 1

GREG'S inside variable cost is 21 per unit

and Break even point unit where outsourcing and inhouse cost same is 39000.

please see detail solution below

	Rate	Unit	outsourced Cost	Savings	in house total cost
	27	28800.00	7,77,600.00	61,200.00	8,38,800.00
	27	26600.00	7,18,200.00	74,400.00	7,92,600.00
	Calculate v.c per unit using high & low		=(high activity cost-low activity cost)/(high activity unit-low activity unit)
	High activity cost	8,38,800.00
	Low activity cost	7,92,600.00
	High activity Unit	28800.00
	Low activity Unit	26600.00
	V.c	21.00
Calculate fixed cost
		234000.00	=high activity cost-(high activity unit*v.c per unit)
Calculate break even units
	Saving in variable cost	6.00	(=27-21)
	BEP units	39000.00	(234000/6)
	outsource cost	1053000.00	=39000*27
	in house cost	1053000.00	=(39000*21)+234000