Academic Integrity: tutoring, explanations, and feedback — we don’t complete graded work or submit on a student’s behalf.

Royal Company manufactures 19,000 units of part R-3 each year for use on its pro

ID: 2381296 • Letter: R

Question

Royal Company manufactures 19,000 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 19,000 units of part R-3 each year to Royal Company for $44.50 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 $428,900. However, Royal Company has determined that $12 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? (Omit the "$" sign in your response.)

     

   

     

   

    

Royal Company manufactures 19,000 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

What is the total relevant cost of making the product? (Omit the "$" sign in your response.)



Relevant cost per part to manufacture = Direct materials+Direct labor+Variable manufacturing overhead + Avoidable Fixed manufacturing overhead


Relevant cost per part to manufacture = 5.70+7+3.70+(18-12) = 22.40


Total relevant cost of making the product (19,000 units)= 19000*22.40 + 428900 =854500




Total relevant cost of buying the product (19,000 units)= 44.50*19000= 845500




Oppurtunity cost =854500-845500 =9000



a.

What is the total relevant cost of making the product? (Omit the "$" sign in your response.)