Gilberto Company currently manufactures 50,000units per year of one of its cruci

Question

Gilberto Company currently manufactures 50,000units per year of one of its crucial parts. Variable costs are $2.50 per unit, fixed costs related to making this part are $50,000 per year, and allocated fixed costs are $50,000 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 $3.70 per unit guaranteed for a three-year period Calculate the total incremental cost of making 50,000 units. (Round cost per unit answers to 2 decimal places.) Incremental Costs to Make Relevant Amount per Unit Relevant fixed costs Total relevant costs ariable cost ixed manufacturing costs 50,000$ 50,000 Total incremental cost to make 50,000 Calculate the total incremental cost of buying 50,000 units. (Round cost per unit answers to 2 decimal places.) Incremental Costs to Buy Relevant Amount per Unit Relevant fixed costs Total relevant costs rchase price Total incremental cost to buy

Explanation / Answer

1.

Incremental Costs to Make Relevent amount per unit Relevent fixed costs Total relevent costs Variable cost $2.50 50,000*$2.50 = $125,000 Fixed manufacturing costs $50,000 $50,000 Total incremental cost to make $175,000

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