Manson Industries incurs unit costs of $8 ($5 variable and $3 fixed) in making an assembly part for its finished product. A supplier offers to make 10,000 of the assembly part at $6 per unit. If the offer is accepted, Manson will save all variable costs but no fixed costs. Prepare an analysis showing the total cost saving, if any, Manson will realize by buying the part. (Enter negative amounts using either a negative sign preceding the number e.g. -45 or parentheses e.g. (45).)     Make   Buy   Net Income Increase (Decrease)   Variable manufacturing costs   $enter a dollar amount   $enter a dollar amount   $enter the difference between the two previous amounts in the row   Fixed manufacturing costs   enter a dollar amount   enter a dollar amount   enter the difference between the two previous amounts in the row   Purchase price   enter a dollar amount   enter a dollar amount   enter the difference between the two previous amounts in the row      Total annual cost   $enter a total amount   $enter a total amount   $enter a total amount     The decision should be to select between make or buy                                                            the part.

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
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Manson Industries incurs unit costs of $8 ($5 variable and $3 fixed) in making an assembly part for its finished product. A supplier offers to make 10,000 of the assembly part at $6 per unit. If the offer is accepted, Manson will save all variable costs but no fixed costs. Prepare an analysis showing the total cost saving, if any, Manson will realize by buying the part. (Enter negative amounts using either a negative sign preceding the number e.g. -45 or parentheses e.g. (45).)

    Make   Buy   Net Income
Increase (Decrease)
 

Variable manufacturing costs

  $enter a dollar amount   $enter a dollar amount   $enter the difference between the two previous amounts in the row  

Fixed manufacturing costs

  enter a dollar amount   enter a dollar amount   enter the difference between the two previous amounts in the row  

Purchase price

  enter a dollar amount   enter a dollar amount   enter the difference between the two previous amounts in the row  

   Total annual cost

  $enter a total amount   $enter a total amount   $enter a total amount  

 

The decision should be to select between make or buy                                                            the part.
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