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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 4,200 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 5,900 units of part A for the next year’s production. Cory Corporation has offered to supply 5,900 units of part A at a price of $7.00 per unit. If Gent accepts the offer, all of the variable costs and $1,260 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 4,200 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 5,900 units of part A for the next year’s production. Cory Corporation has offered to supply 5,900 units of part A at a price of $7.00 per unit. If Gent accepts the offer, all of the variable costs and $1,260 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 ______

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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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 4,200 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 5,900 units of part A for the next year’s production.

Cory Corporation has offered to supply 5,900 units of part A at a price of $7.00 per unit. If Gent accepts the offer, all of the variable costs and $1,260 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 4,200 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 5,900 units of part A for the next year's production. Cory Corporation has offered to supply 5,900 units of part A at a price of $7.00 per unit. If Gent accepts the offer, all of the variable costs and $1,260 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 4,200 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 5,900 units of part A for the next year's production. Cory Corporation has offered to supply 5,900 units of part A at a price of $7.00 per unit. If Gent accepts the offer, all of the variable costs and $1,260 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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