Gilberto Company currently manufactures 40,000units per year of one of its cruci

Question

Gilberto Company currently manufactures 40,000units per year of one of its crucial parts. Variable costs are $2.40 per unit, fixed costs related to making this part are $40,000 per year, and allocated fixed costs are 30,000 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 $3.60 per unit guaranteed for a three-year period Calculate the total incremental cost of making 40,000 units. (Round cost per unit answers to 2 decimal places.) Incremental Costs to Make Relevant fixed Total relevant Amount per Unit costs costs Total incremental cost to make Calculate the total incremental cost of buying 40,000 units. (Round cost per unit answers to 2 decimal

Explanation / Answer

Incremental Costs to Make

Incremental Costs to Buy

2) Make

Relevant Amount per Unit Relevant Fixed Costs Total Relevant Costs Variable cost per unit(40,000 units @$2.40) $2.40 $96,000 Fixed manufacturing costs $40,000 $40,000 Total incremental cost to make $136,000

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