TB MC Qu. 10-50 Factor Co. can produce a unit of product... Factor Co. can produce a unit of product for the following c...
TB MC Qu. 10-50 Factor Co. can produce a unit of product...
Factor Co. can produce a unit of product for the following costs:
| Direct material | $ | 7.10 | |
| Direct labor | 23.10 | ||
| Overhead | 35.50 | ||
| Total product cost per unit | $ | 65.70 | |
An outside supplier offers to provide Factor with all the units it needs at $38.85 per unit. If Factor buys from the supplier, the company will still incur 70% of its overhead. Factor should choose to:
Multiple Choice:
a. Buy since the relevant cost to make it is $55.05.
b. Make since the relevant cost to make it is $40.85.
c. Buy since the relevant cost to make it is $40.85.
d. Make since the relevant cost to make it is $30.20.
e. Buy since the relevant cost to make it is $30.20.
Homework Answers
Costs to make
= 7.10+23.10+(35.50*30%)
= 40.85
Cost if bought = $38.85
So it's better if bought
Option C is the answer
Add Answer to:
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