ABC Company currently produces 8,000 units of part A99. Current unit costs for part A99 are: Direct Materials $12 Direct Labor $9 Factory rent $7 Admin costs $10 General factory overhead (allocated) $7 Total $45 If ABC company decides to buy part A99, 50% of the admin costs would be avoided. All the company's items, inclduing part A99 are manufactured in the same rented facility. The company has an offer from a wholesaler that wishes to sell the part to ABC for $31 per unit. What will occur if the company accepts the offer? a- The cost for this part will decrease by $10 per unit b- The csot for this part will be the same c- the cost for this part will decrease by $14 per unit d- the cost for this part will increase by $5 per unit
ABC Company currently produces 8,000 units of part A99. Current unit costs for part A99 are:
Direct Materials $12
Direct Labor $9
Factory rent $7
Admin costs $10
General factory overhead (allocated) $7
Total $45
If ABC company decides to buy part A99, 50% of the admin costs would be avoided. All the company's items, inclduing part A99 are manufactured in the same rented facility. The company has an offer from a wholesaler that wishes to sell the part to ABC for $31 per unit. What will occur if the company accepts the offer?
a- The cost for this part will decrease by $10 per unit
b- The csot for this part will be the same
c- the cost for this part will decrease by $14 per unit
d- the cost for this part will increase by $5 per unit
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