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 1.50 Manufacturing overhead 1.30 Total $6.80 Variable manufacturing overhead is applied at $1.00 per unit. The other $0.30 of overhead consists of allocated fixed costs. Gent will need 6,100 units of part A for the next year’s production. Cory Corporation has offered to supply 6,100 units of part A at a price of $7.00 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 _________ Differential cost $_________ B. Should Gent Designs accept the offer from Cory Corporation? Gent Designs ________
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 1.50 Manufacturing overhead 1.30 Total $6.80 Variable manufacturing overhead is applied at $1.00 per unit. The other $0.30 of overhead consists of allocated fixed costs. Gent will need 6,100 units of part A for the next year’s production. Cory Corporation has offered to supply 6,100 units of part A at a price of $7.00 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 _________ Differential cost $_________ B. Should Gent Designs accept the offer from Cory Corporation? Gent Designs ________
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 | 1.50 |
| Manufacturing |
1.30 |
| Total | $6.80 |
Variable manufacturing overhead is applied at $1.00 per unit. The other $0.30 of overhead consists of allocated fixed costs. Gent will need 6,100 units of part A for the next year’s production.
Cory Corporation has offered to supply 6,100 units of part A at a price of $7.00 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 _________
Differential cost $_________
B. Should Gent Designs accept the offer from Cory Corporation?
Gent Designs ________
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
1.50
Manufacturing overhead
1.30
Total
$6.80
Variable manufacturing overhead is applied at $1.00 per unit. The other $0.30 of overhead consists of allocated fixed costs. Gent will need 6,100 units of part A for the next
year's production.
Cory Corporation has offered to supply 6,100 units of part A at a price of $7.00 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
Differential cost
B. Should Gent Designs accept the offer from Cory Corporation?
Gent Designs
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