GR Company uses 8,000 units of a certain part in production each year. Presently, this part is purchased from an outside supplier at $12 per unit. For some time, there has been idle capacity in GR's factory that could be utilized to make this part. If GR decides to make the part, there would be an increase of $12,000 in fixed manufacturing costs for the salary of a new supervisor. The following information has been assembled on the unit costs of making this part internally: Direct Materials $3.25 Direct Labor 2.75 Variable Manufacturing Overhead 2.00 Fixed Manufacturing Overhead (Allocated) 5.00 Assuming other things stay the same, at what price per unit from the outside supplier should GR be indifferent (on economic grounds) to buying or making the part? a. $8.00 b. $13.00 c. $8.50 d. $9.50 e. $9.00

GR Company uses 8,000 units of a certain part in production each year. Presently, this part is purchased from an outside supplier at $12 per unit. For some time, there has been idle capacity in GR's factory that could be utilized to make this part. If GR decides to make the part, there would be an increase of $12,000 in fixed manufacturing costs for the salary of a new supervisor. The following information has been assembled on the unit costs of making this part internally: Direct Materials $3.25 Direct Labor 2.75 Variable Manufacturing Overhead 2.00 Fixed Manufacturing Overhead (Allocated) 5.00 Assuming other things stay the same, at what price per unit from the outside supplier should GR be indifferent (on economic grounds) to buying or making the part? a. $8.00 b. $13.00 c. $8.50 d. $9.50 e. $9.00

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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