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 53,000 units of RX5 follows.

Direct materials and direct labor are 100% variable. Overhead is 80% fixed. An outside supplier has offered to supply the 53,000 units of RX5 for $19.00 per unit.

Calculate the incremental costs of making and buying component RX5.

Haver Company currently produces component RX5 for its sole product. The current cost per unit to manufacture the required 53,000 units of RX5 follows.

Explanation / Answer

Total incremental costs of: Making the units Buying the units Total direct materials 265000 (5*53000) Total direct labor 477000 (9*53000) Variable overhead costs 106000 (2*53000) Fixed Overhead costs 424000 424000 (8*53000) Fixed Cost to buy the units 1007000 (19*53000) Total costs 1272000 1431000 Should the company continue to manufacture the part, or should it buy the part from the outside supplier? It should continue to manufacture

Related Questions

Navigate

• Browse (All)
• Browse H
• Subjects

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