Secure https//newconnectmheducation.com/low/connect.html saved 6 Gelb Company cu

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Secure https//newconnectmheducation.com/low/connect.html saved 6 Gelb Company currently manufactures 48,500 units per year of a key c $5 15 per unit, fixed all component from a supplier for $3.90 per unit costs related to making this component are $73.000 per year, and allocated fixed costs are $58,500 per year The unavoidable whether the company makes or buys this component. The company is considering buying this 125 Calculate the total incremental cost of making 48.500 and buying 48.500 units Should it continue to manufacture the component, or 2200 should it buy this component from the outside supplier? (Round "purchase price per unit" answer to 2 decimal places.) Complete this question by entering your answers in the tabs below. to Make Costs to Buy Supplier cost of Amount per Fixed Costs Next >

Explanation / Answer

SOLUTION

1. Incremental cost to make-

2. Incremental cost to buy-

3. Gelb should buy the 48,500 units, as the incremental cost is less than making.

Relevant Variable cost ($) Relevant fixed costs ($) Total ($) Variable costs (48,500 units * $5.15) 249,775 249,775 Incremental fixed costs 73,000 73,000 Total incremental cost to make 322,775

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