M WS5 Connect Exercises a x C Not secure l eztomheducationco

M WS5 Connect Exercises a x C Not secure l ezto.mheducation.com/hm.tpx Exercise 23-5 Make or buy LO A1 Gelb Company currently manufactures 40,000 units per year of a key component for its manufacturing process. Variable costs are $1.95 per unit, fixed costs related to making this component are $65,000 per year, and allocated fixed costs are $58,500 per year. The allocated fteed costs are unavoidable company makes or buys this component. The company supplier for $3.50 per unit is considering buying this component from a Calculate the total incremental cost of making 40,000 units. (Round \"variable cost per unit\" answer to decimal places.) Incremental Costs to Make Relevant Relevant Fixed Total Relevant $ 78,000 65,000 65,000 S 143,000 Costs Costs Unit Variable cost per unit xed manufacturing costs Total incremental cost to make Calculate the total incremental cost of buying 40,000 units. (Round \"purchase price per unit\" answer to 2 decimal places.) Incremental Costs to Buy Relevant Relevant Fixed Total Relevant Amount per Costs Costs Unit Purchase price per unit 3.50 Total incremental cost to buy

Solution

Incremental Costs to Make Relevant Amount per Unit Relevant fixed Costs Total Relevant Costs Variable cost per unit 1.95 78000 Fixed manufacturing costs 65000 65000 Total incremental cost to make 143000 Incremental Costs to Buy Relevant Amount per Unit Relevant fixed Costs Total Relevant Costs Purchase price per unit 3.5 140000 Total incremental cost to buy 140000