dent Designs requires three units of part A for every unit of A1 that it produces. Currently, part A is made by Gent, with these per-unit costs in a month when 3,900 units were produced: Direct materials $4.00 Direct labor 1.40 Manufacturing overhead 1.30 Cost to buy Cost to make Total Variable manufacturing overhead is applied at $1.00 per unit. The other $0.30 of overhead consists of allocated fixed costs. Gent will need 6,200 units of part A for the next year's production Cory Corporation has offered to supply 6,200 units of part A at a price of $6.90 per unit. If Gent accepts the offer, all of the variable costs and $1,170 of the fixed costs will be avoided. A. Calculate the differential cost? $6.70 Differential cost B. Should Gent Designs accept the offer from Cory Corporation?
dent Designs requires three units of part A for every unit of A1 that it produces. Currently, part A is made by Gent, with these per-unit costs in a month when 3,900 units were produced: Direct materials $4.00 Direct labor 1.40 Manufacturing overhead 1.30 Cost to buy Cost to make Total Variable manufacturing overhead is applied at $1.00 per unit. The other $0.30 of overhead consists of allocated fixed costs. Gent will need 6,200 units of part A for the next year's production Cory Corporation has offered to supply 6,200 units of part A at a price of $6.90 per unit. If Gent accepts the offer, all of the variable costs and $1,170 of the fixed costs will be avoided. A. Calculate the differential cost? $6.70 Differential cost B. Should Gent Designs accept the offer from Cory Corporation?
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Question
![Gent Designs requires three units of part A for every unit of A1 that it produces. Currently, part A is made by Gent, with these per-unit costs in a month when 3,900 units were produced:
Direct materials
$4.00
Direct labor
1.40
Manufacturing overhead
1.30
Total
Variable manufacturing overhead is applied at $1.00 per unit. The other $0.30 of overhead consists of allocated fixed costs. Gent will need 6,200 units of part A for the next year's production.
Cory Corporation has offered to supply 6,200 units of part A at a price of $6.90 per unit. If Gent accepts the offer, all of the variable costs and $1,170 of the fixed costs will be avoided.
A. Calculate the differential cost?
Cost to buy
Cost to make
$6.70
Differential cost
B. Should Gent Designs accept the offer from Cory Corporation?
Gent Designs should not accept the offer.](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Fcf8d6db7-d931-4653-be89-42df8b618fd8%2F6ecd4b9c-756e-4cdd-9faa-2dcb276ce596%2Foq3a3h_processed.png&w=3840&q=75)
Transcribed Image Text:Gent Designs requires three units of part A for every unit of A1 that it produces. Currently, part A is made by Gent, with these per-unit costs in a month when 3,900 units were produced:
Direct materials
$4.00
Direct labor
1.40
Manufacturing overhead
1.30
Total
Variable manufacturing overhead is applied at $1.00 per unit. The other $0.30 of overhead consists of allocated fixed costs. Gent will need 6,200 units of part A for the next year's production.
Cory Corporation has offered to supply 6,200 units of part A at a price of $6.90 per unit. If Gent accepts the offer, all of the variable costs and $1,170 of the fixed costs will be avoided.
A. Calculate the differential cost?
Cost to buy
Cost to make
$6.70
Differential cost
B. Should Gent Designs accept the offer from Cory Corporation?
Gent Designs should not accept the offer.
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