You need 1,000 units of product Y per month. You currently make product Yin-house at a cost of $7/unit, which consists of $2/unit of fixed costs and$5/unit of variable costs. An outside supplier has offered to manufactureproduct Y for you at a wholesale price of $2 per unit. If you outsource theproduction of Y to the outside supplier in the short term, your profit will:increase by $3,000decrease by $2,000remain the samedecrease by $3,000increase by $2,000

Answer : Profit will increase (Decrease) by = Variable cost - Purchase cost Profit will increase…

Answered: ost of $7/unit, which consists of $2…

ost of $7/unit, which consists of $2 ble costs. An outside supplier has c ou at a wholesale price of $2 per um to the outside supplier in the short

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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Concept explainers

Pricing

Pricing is used as a term in finance and economics, pricing is the process of fixing a value for a product or a service. Pricing establishes a value for a product or service that the customer has to pay. A business can choose from different strategies while deciding to set prices.

Question

You need 1,000 units of product Y per month. You currently make product Y
in-house at a cost of $7/unit, which consists of $2/unit of fixed costs and
$5/unit of variable costs. An outside supplier has offered to manufacture
product Y for you at a wholesale price of $2 per unit. If you outsource the
production of Y to the outside supplier in the short term, your profit will:
increase by $3,000
decrease by $2,000
remain the same
decrease by $3,000
increase by $2,000

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REQUIRED Calculate the number of orders that should be placed based on the quantity that will keep the cost of placing the orders and the holding costs at a minimum. INFORMATION The following information was supplied by KL Suppliers for the only product that it sells: Monthly demand Unit cost Fixed cost per order Carrying cost per unit EOQ 300 units R20 R25 10% of the unit cost 300 units