Swifty Corporation produces corn chips. The cost of one batch is below: Direct materials $19 Direct...
Swifty Corporation produces corn chips. The cost of one batch is
below:
| Direct materials | $19 |
| Direct labor | 12 |
| Variable overhead | 11 |
| Fixed overhead | 14 |
An outside supplier has offered to produce the corn chips for $29
per batch. How much will Swifty Corporation save if it accepts the
offer?
a. $13 per batch
b. $16 per batch
c. $27 per batch
d. $2 per batch
Homework Answers
Relevant manufacturing cost = Direct material + Direct labor + Variable overhead = $19+12+11 = $42
Saving if it accepts the offer = Relevant manufacturing cost - Purchase price
= $42 - $29
= $13 per batch
Option a. is correct answer.
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