Question

Haver Company currently produces component RX5 for its sole product. The current cost per unit to...

Haver Company currently produces component RX5 for its sole product. The current cost per unit to manufacture the required 64,000 units of RX5 follows.

Direct materials $ 4.00
Direct labor 8.00
Overhead 9.00
Total costs per unit 21.00


Direct materials and direct labor are 100% variable. Overhead is 70% fixed. An outside supplier has offered to supply the 64,000 units of RX5 for $20.00 per unit.

Required:
1. Calculate the incremental costs of making and buying component RX5.

0 0
Add a comment Improve this question Transcribed image text
Answer #1

1.

Total Incremental Costs of: Making the Units Buying the units
Direct material ($4*64000) $          256,000.00
Direct labor ($8*64000) $          512,000.00
Variable overhead ($9*64000*30%) $          172,800.00
Purchase cost ($20*64000) $        1,280,000.00
Total cost $          940,800.00 $        1,280,000.00
Company should continue making the component RX5

Since Cost to make is less than cost to buy company should continue making the units.

Notes: Overheads are 70% fixed which are not relevant for incremental cost, however 30 % variable overheads are relevant cost. Hence considered.

Add a comment
Know the answer?
Add Answer to:
Haver Company currently produces component RX5 for its sole product. The current cost per unit to...
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Not the answer you're looking for? Ask your own homework help question. Our experts will answer your question WITHIN MINUTES for Free.
Similar Homework Help Questions
  • Haver Company currently produces component RX5 for its sole product. The current cost per unit to...

    Haver Company currently produces component RX5 for its sole product. The current cost per unit to manufacture the required 56,000 units of RX5 follows $ 4.00 Direct materials Direct labor 8.00 Overhead 9.00 Total costs per unit 21.00 Direct materials and direct labor are 100% variable. Overhead is 80% fixed. An outside supplier has offered to supply the 56,000 units of RX5 for $19.00 per unit. Required: 1. Calculate the incremental costs of making and buying component RX5 Buying the...

  • Haver Company currently produces component RX5 for its sole product. The current cost per unit to...

    Haver Company currently produces component RX5 for its sole product. The current cost per unit to manufacture the required 67,000 units of RX5 follows. Direct materials $ 4.00 Direct labor 8.00 Overhead 9.00 Total costs per unit 21.00 Direct materials and direct labor are 100% variable. Overhead is 70% fixed. An outside supplier has offered to supply the 67,000 units of RX5 for $19.00 per unit. Required: 1. Calculate the incremental costs of making and buying component RX5.

  • 23 Haver Company currently produces component RX5 for its sole product. The current cost per unit...

    23 Haver Company currently produces component RX5 for its sole product. The current cost per unit to manufacture the required 58,000 units of RX5 follows. Direct materials Direct labor Overhead Total costs per unit $ 4.00 8.00 9.00 21.00 Direct materials and direct labor are 100% variable. Overhead is 80% fixed. An outside supplier has offered to supply the 58,000 units of RX5 for $19.00 per unit. Required: 1. Calculate the incremental costs of making and buying component RX5. Total...

  • Haver Company currently produces component RX5 for its sole product. The current cost per unit to...

    Haver Company currently produces component RX5 for its sole product. The current cost per unit to manufacture the required 53,000 units of RX5 follows. Direct materials Direct labor Overhead Total costs per unit $ 5.00 9.00 10.00 24.00 Direct materials and direct labor are 100% variable. Overhead is 80% fixed. An outside supplier has offered to supply the 53,000 units of RX5 for $20.00 per unit. Required: 1. Calculate the incremental costs of making and buying component RX5. Total incremental...

  • Haver Company currently produces component RX5 for its sole product. The current cost per unit to...

    Haver Company currently produces component RX5 for its sole product. The current cost per unit to manufacture the required 65,000 units of RX5 follows. $ 5.00 9.00 Direct materials Direct labor Overhead 10.00 $ 24.00 Total costs per unit Direct materials and direct labor are 100% variable. Overhead is 80% fixed. An outside supplier has offered to supply the 65,000 units of RX5 for $20.00 per unit. Required: 1. Calculate the incremental costs of making and buying component RX5. Total...

  • Haver Company currently produces component RX5 for its sole product. The current cost per unit to...

    Haver Company currently produces component RX5 for its sole product. The current cost per unit to manufacture the required 50.000 units of RX5 follows. Direct materials $ 5.00 Direct labor Overhead Total costs per unit $22.00 8.00 9.00 Direct materials and direct labor are 100% variable. Overhead is 80% fixed. An outside supplier has offered to supply the 50,000 units of RX5 for $18.00 per unit. Required: 1. Calculate the incremental costs of making and buying component RX5. Total incremental...

  • Haver Company currently produces component RX5 for its sole product. The current cost per unit to...

    Haver Company currently produces component RX5 for its sole product. The current cost per unit to manufacture the required 58,000 units of RX5 follows. Direct materials Direct labor Overhead Total costs per unit $ 5.00 9.00 10.00 24.00 Direct materials and direct labor are 100% variable. Overhead is 80% fixed. An outside supplier has offered to supply the 58,000 units of RX5 for $19.00 per unit. Required: 1. Calculate the incremental costs of making and buying component RX5. Total incremental...

  • Haver Company currently produces component RX5 for its sole product. The current cost per unit to...

    Haver Company currently produces component RX5 for its sole product. The current cost per unit to manufacture the required 54,000 units of RX5 follows. Direct materials Direct labor Overhead Total costs per unit $ 5.00 9.00 10.89 24.00 Direct materials and direct labor are 100% variable. Overhead is 80% fixed. An outside supplier has offered to supply the 54,000 units of RX5 for $18.00 per unit. Required: 1. Calculate the incremental costs of making and buying component RX5. Total incremental...

  • Haver Company currently produces component RX5 for its sole product. The current cost per unit to...

    Haver Company currently produces component RX5 for its sole product. The current cost per unit to manufacture the required 50,000 units of RX5 follows. Direct materials Direct labor Overhead Total costs per unit $ 5.00 8.00 9.00 $22.00 Direct materials and direct labor are 100% variable. Overhead is 80% fixed. An outside supplier has offered to supply the 50,000 units of RX5 for $18.00 per unit. Required: 1. Determine the total incremental cost of making 50,000 units of RX5. 2....

  • Haver Company currently produces component RXS for its sole product. The current cost per unit to...

    Haver Company currently produces component RXS for its sole product. The current cost per unit to manufacture the required 67000 units of RX5 follows. 9.00 Direct materials Direct labor Overhead Total costs per unit 24.08 Direct materials and direct labor are 100% variable, Overhead is 80% fixed. An outside supplier has offered to supply the 67.000 unit of RX5 for $18.00 per unit. Required: 1. Calculate the incremental costs of making and buying component RX5. Buying the units Total incremental...

ADVERTISEMENT
Free Homework Help App
Download From Google Play
Scan Your Homework
to Get Instant Free Answers
Need Online Homework Help?
Ask a Question
Get Answers For Free
Most questions answered within 3 hours.
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT