Gilberto Company currently manufactures 60,000 units per year ofone of its crucial parts. Variable costs are $1.60 per unit, fixedcosts related to making this part are $60,000 per year, andallocated fixed costs are $30,000 per year. Allocated fixed costsare unavoidable whether the company makes or buys the part.Gilberto is considering buying the part from a supplier for aquoted price of $2.80 per unit guaranteed for a three-yearperiod.
Calculate the total incremental cost of making 60,000 and buying60,000 units. Should the company continue to manufacture the part,or should it buy the part from the outside supplier?
Calculate the total incremental cost of making 60,000 units.(Round cost per unit answer to 2 decimal places.)
Incremental Costs to Make Relevant Amount per Unit Relevant fixed costs Total relevant costs Total incrementalcost to make
Calculate the total incremental cost of buying 60,000 units.(Round cost per unit answer to 2 decimal places.)
Incremental Costs to Buy Relevant Amount per Unit Relevant fixed costs Total relevant costs Total incrementalcost to buy
Should the company continue to manufacture the part, or shouldit buy the part from the outside supplier?
Should Gilberto make the part or purchaseit from the outside supplier?
Gilberto Company currently manufactures 60,000 units per year ofone of its crucial parts. Variable costs are $1.60 per unit, fixedcosts related to making this part are $60,000 per year, andallocated fixed costs are $30,000 per year. Allocated fixed costsare unavoidable whether the company makes or buys the part.Gilberto is considering buying the part from a supplier for aquoted price of $2.80 per unit guaranteed for a three-yearperiod.
Calculate the total incremental cost of making 60,000 and buying60,000 units. Should the company continue to manufacture the part,or should it buy the part from the outside supplier?
Calculate the total incremental cost of making 60,000 units.(Round cost per unit answer to 2 decimal places.)
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Calculate the total incremental cost of buying 60,000 units.(Round cost per unit answer to 2 decimal places.)
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Should the company continue to manufacture the part, or shouldit buy the part from the outside supplier?
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Related questions
TB Problem Qu. 1-288 Balerio Corporation's relevant ...
Balerio Corporation's relevant range of activity is 8,000 unitsto 11,000 units. When it produces and sells 10,000 units, itsaverage costs per unit are as follows:
| Average Costper Unit | ||
| Direct materials | $ | 6.40 |
| Direct labor | $ | 3.20 |
| Variable manufacturing overhead | $ | 1.50 |
| Fixed manufacturing overhead | $ | 14.40 |
| Fixed selling expense | $ | 2.80 |
| Fixed administrative expense | $ | 2.00 |
| Sales commissions | $ | 0.80 |
| Variable administrative expense | $ | 0.70 |
Required:
a. For financial reporting purposes, what is the total amount ofproduct costs incurred to make 10,000 units? (Do not roundintermediate calculations.)
b. If 9,000 units are sold, what is the variable cost per unitsold? (Round "Per unit" answer to 2 decimalplaces.)
c. If 9,000 units are sold, what is the total amount of variablecosts related to the units sold? (Do not round intermediatecalculations.)
d. If the selling price is $19.20 per unit, what is thecontribution margin per unit sold? (Round "Per unit" answerto 2 decimal places.)
e. What incremental manufacturing cost will the company incur ifit increases production from 10,000 to 10,001 units? (Round"Per unit" answer to 2 decimal places.)
| Han Products manufactures 17,000 units of part S-6 each year for use on its production line. At this level of activity, the cost per unit for part S-6 is: |
| Direct materials | $ | 4.80 |
| Direct labor | 8.00 | |
| Variable manufacturing overhead | 3.10 | |
| Fixed manufacturing overhead | 15.00 | |
| Total cost per part | $ | 30.90 |
| An outside supplier has offered to sell 17,000 units of part S-6 each year to Han Products for $42.50 per part. If Han Products accepts this offer, the facilities now being used to manufacture part S-6 could be rented to another company at an annual rental of $362,200. However, Han Products has determined that two-thirds of the fixed manufacturing overhead being applied to part S-6 would continue even if part S-6 were purchased from the outside supplier. |
| Required: |
| a. | Calculate the per unit and total relevant cost for buying and making the product? (Round your "per unit" answers to 2 decimal places.) | |||||||||||||||||||||||||||||||||||||||||||||
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| b. | How much will profits increase or decrease if the outside supplierâs offer is accepted? |
Profit would? By ?.
