Haver Company currently produces component RX5 for its sole product. The current

Question

Haver Company currently produces component RX5 for its sole product. The current cost per unit to manufacture the required 56,00 units of RX5 follows. Direct materials Direct labor Overhead 5.00 10.00 24.00 Total costs per unit Direct materials and direct labor are 100% variable. Overhead is 70% fixed. An outside supplier has offered to supply the 55,000 units of RX5 for $19.00 per unit. Required 1. Calculate the incremental costs of making and buying component RX5 Total incremental costs of: Making the units Buying the units Total costs Should the company continue to manufacture the part, or should it buy the part from the outside supplier?

Explanation / Answer

Calculate incremental cost :

Company should continue to manufacture the part

Total incremental costs of Making the units Buying the units Direct material 280000 Direct labour 504000 Variable overhead (56000*10*30%) 168000 Purchase cost (56000*19) 1064000 Total cost 952000 1064000

Related Questions

Navigate

• Browse (All)
• Browse H
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.