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$4.00Direct labor1.40Manufacturing overhead1.30Total$6.70Variable manufacturing overhead is applied at $1.00 per unit. The other $0.30 of overhead consists of allocated fixed costs. Gent will need 5,800 units of part A for the next year’s production.Cory Corporation has offered to supply 5,800 units of part A at a price of $6.90 per unit. If Gent accepts the offer, all of the variable costs and $1,170 of the fixed costs will be avoided.A. Calculate the differential cost?Cost to buy$fill in the blank 1Cost to makefill in the blank 2Differential cost$fill in the blank 3B. Should Gent Designs accept the offer from Cory Corporation? Gent Designs requires three units of part A for every unit of A1 that it produces. Currently, part A ismade by Gent, with these per-unit costs in a month when 3,900 units were produced:Direct materials$4.00Direct labor1.40Manufacturing overhead1.30Total$6.70Variable manufacturing overhead is applied at $1.00 per unit. The other $0.30 of overhead consists ofallocated fixed costs. Gent will need 5,800 units of part A for the next year's production.Cory Corporation has offered to supply 5,800 units of part A at a price of $6.90 per unit. If Gent acceptsthe offer, all of the variable costs and $1,170 of the fixed costs will be avoided.A. Calculate the differential cost?Cost to buyCost to makeDifferential costB. Should Gent Designs accept the offer from Cory Corporation?Gent Designs should not accept the offer.

working notes: Cost to Buy=5,800*$6.90=40,020 Cost to make =5,800*4=23,200…

Answered: Gent Designs requires three units of…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

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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 3,900 units were produced:

Direct materials	$4.00
Direct labor	1.40
Manufacturing overhead	1.30
Total	$6.70

Variable manufacturing overhead is applied at $1.00 per unit. The other $0.30 of overhead consists of allocated fixed costs. Gent will need 5,800 units of part A for the next year’s production.

Cory Corporation has offered to supply 5,800 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	$fill in the blank 1
Cost to make	fill in the blank 2
Differential cost	$fill in the blank 3

B. Should Gent Designs accept the offer from Cory Corporation?

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
$6.70
Variable manufacturing overhead is applied at $1.00 per unit. The other $0.30 of overhead consists of
allocated fixed costs. Gent will need 5,800 units of part A for the next year's production.
Cory Corporation has offered to supply 5,800 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
Differential cost
B. Should Gent Designs accept the offer from Cory Corporation?
Gent Designs should not accept the offer.

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