Kando Company incurs a 1000 per unit cost for Product A whic

Kando Company incurs a $10.00 per unit cost for Product A, which it currently manufactures and sells for $13.50 per unit. Instead of manufacturing and selling this product, the company can purchase it for $7.00 per unit and sell it for $11.00 per unit. If it does so, unit sales would remain unchanged and $7.00 of the $10.00 per unit costs assigned to Product A would be eliminated. 1. Prepare an Incremental cost analysis. Should the company continue to manufacture Product A or purchase it for resale? (Round your answers to 2 decimal places.) Manufacture Product A Purchase Product A Sales 13.50 Costs: Avoidable costs Unavoidable costs Cost to purchase Total costs Continue to manufacture Purchase from outside Show All Items The company should:

Solution

Incremental analysis Make Buy Sales 13.5 10 Cost: Avoidable cost 7 Unavoidable 3 3 Cost of purchase 7 Total cost 10 10 Net Margin per unit 3.5 0 The company must Make the component