Exercise 10-12 Make or Buy a Component [LO3] Royal Company manufactures 28,000 u
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Question
Exercise 10-12 Make or Buy a Component [LO3]
Royal Company manufactures 28,000 units of part R-3 each year for use on its production line. At this level of activity, the cost per unit for part R-3 is:
An outside supplier has offered to sell 28,000 units of part R-3 each year to Royal Company for $26.10 per part. If Royal Company accepts this offer, the facilities now being used to manufacture part R-3 could be rented to another company at an annual rental of $211,000. However, Royal Company has determined that $10 of the fixed manufacturing overhead being applied to part R-3 would continue even if part R-3 were purchased from the outside supplier.
What is the total relevant cost of making the product?
How much profits will increase or decrease if the outside supplier%u2019s offer is accepted? (Input the amount as a positive value.)
Royal Company manufactures 28,000 units of part R-3 each year for use on its production line. At this level of activity, the cost per unit for part R-3 is:
Explanation / Answer
a
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