Biz Tech Inc. is currently purchasing a standard part for $52 per unit which is used for manufacturing different types of appliances. The company is operating at 70% capacity and can make the part at a cost of $65 per unit which include an allocated fixed cost per unit of $11. If the company decide to use the idle manufacturing space to produce 30,000 units of parts, what would be the amount of increase or decrease in differential costs from making the part rather than purchasing? Group of answer choices Cost would be decreased or saved by $60,000 Cost would be increased by $150,000 Cost would be decreased by $150,000 Cost would be increased by $60,000
Biz Tech Inc. is currently purchasing a standard part for $52 per unit which is used for manufacturing different types of appliances. The company is operating at 70% capacity and can make the part at a cost of $65 per unit which include an allocated fixed cost per unit of $11. If the company decide to use the idle manufacturing space to produce 30,000 units of parts, what would be the amount of increase or decrease in differential costs from making the part rather than purchasing? Group of answer choices Cost would be decreased or saved by $60,000 Cost would be increased by $150,000 Cost would be decreased by $150,000 Cost would be increased by $60,000
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Question
Biz Tech Inc. is currently purchasing a standard part for $52 per unit which is used for manufacturing different types of appliances. The company is operating at 70% capacity and can make the part at a cost of $65 per unit which include an allocated fixed cost per unit of $11.
If the company decide to use the idle manufacturing space to produce 30,000 units of parts, what would be the amount of increase or decrease in differential costs from making the part rather than purchasing?
Group of answer choices
Cost would be decreased or saved by $60,000
Cost would be increased by $150,000
Cost would be decreased by $150,000
Cost would be increased by $60,000
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