ABC Company produces a product that currently sells for $72 per unit. Current production costs per unit include the following: Direct materials = $20 Direct labor = $24 Variable overhead = $10 Fixed overhead = $10. Product engineering has determined that a certain portion of the product conversion could be outsourced. Direct labor and variable overhead would be reduced by 50 percent. Raw material would not be affected and no other alternative use for any idle production capacity is apparent. The outsourcing supplier would charge ABC $15 to provide this product conversion. Identify the following relevant costs to process further: What is: Avoidable cost if outsourced = $ per unit Cost to buy = $ per unit Difference in conversion cost = $ per unit Decision to make or buy = (Make/Buy)
ABC Company produces a product that currently sells for $72 per unit. Current production costs per unit include the following: Direct materials = $20 Direct labor = $24 Variable
Avoidable cost if outsourced = $ per unit
Cost to buy = $ per unit
Difference in conversion cost = $ per unit
Decision to make or buy = (Make/Buy)
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