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 ______
![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](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Fc7e38550-eb9e-4148-b5f4-8f82d0a62b02%2F8f4273f9-f696-4dc4-bf78-f4fb14f5424d%2F7qyt5rw_processed.png&w=3840&q=75)
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