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 4,000 units were produced: Direct materials $4.00 Direct labor 1.40 Manufacturing overhead 1.20 Total $6.60 Variable manufacturing overhead is applied at $1.00 per unit. The other $0.20 of overhead consists of allocated fixed costs. Gent will need 6,000 units of part A for the next year's production. Cory Corporation has offered to supply 6,000 units of part A at a price of $6.80 per unit. If Gent accepts the offer, all of the variable costs and $800 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

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
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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 4,000 units were
produced:
Direct materials
$4.00
Direct labor
1.40
Manufacturing overhead
1.20
Total
$6.60
Variable manufacturing overhead is applied at $1.00 per
unit. The other $0.20 of overhead consists of allocated
fixed costs. Gent will need 6,000 units of part A for the
next year's production.
Cory Corporation has offered to supply 6,000 units of part
A at a price of $6.80 per unit. If Gent accepts the offer, all
of the variable costs and $800 of the fixed costs will be
avoided.
A. Calculate the differential cost?
Cost to buy
Cost to make
Differential cost
2$
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 4,000 units were produced: Direct materials $4.00 Direct labor 1.40 Manufacturing overhead 1.20 Total $6.60 Variable manufacturing overhead is applied at $1.00 per unit. The other $0.20 of overhead consists of allocated fixed costs. Gent will need 6,000 units of part A for the next year's production. Cory Corporation has offered to supply 6,000 units of part A at a price of $6.80 per unit. If Gent accepts the offer, all of the variable costs and $800 of the fixed costs will be avoided. A. Calculate the differential cost? Cost to buy Cost to make Differential cost 2$ B. Should Gent Designs accept the offer from Cory Corporation? Gent Designs
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