8- Homework Help G berto Company currently manufactures 50,000 units per year of

Question

8- Homework Help G berto Company currently manufactures 50,000 units per year of one of its crucial parts. Variable costs are $1.70 per unit, fixed costs related to making this part are $50,000 per yeas, and allocated fixed costs are $45,000 per year. Allocated fixed costs are unavoidable whether the company makes or buys the part. Gilberto is considering buying the part from a supplier for a quoted price of $3.10 per unit guaranteed for a three-year period Calculate the total Incremental cost of making 50,000 and buying 50.000 units. Should the company continue to manufacture the part, or should it buy the part from the outside supplier? Complete this question by entering your answers in the tabs below. Costs to Make Costs to Buy Supplier Outside Caiculate the total incremental cost of making so,000 units. (Round cost per unit answer to 2 decimal places) Costs to Make Relevant Amount per Relavant fixed Total relevant Total incremental cost to make Costs to Buy 10, 4??? Next > MacBook Air

Explanation / Answer

Gilberto ompany Incremental Cost to make Relevant Amount per unit Relevant Fixed Cost Total Relevant Cost * Variable Cost $                                           1.70 $                         85,000.00 Fixed Manufacturing Cost $                   50,000.00 $                         50,000.00 Total Incremental cost to make $                      1,35,000.00 * Variable Cost=50000 Units*$1.70=$85000 Incremental Cost to Buy Relevant Amount per unit Relevant Fixed Cost Total Relevant Cost * Purchase Price Per Unit $                                           3.10 $                      1,55,000.00 Manufatuirng cost is less than the buying cost so company should continue to manufacture the part.

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