Peterson Manufacturing can produce a component of its product that incurs the following costs per unit: Direct materials: $12.50 • Direct labor: $16.20 • Variable overhead: $4.30 • Fixed overhead: $9.50 An outside supplier has offered to sell the product to Peterson for $42.00 per unit. Compute the net incremental cost or savings of buying the component. a. $4.30 cost per unit. b. $9.00 more per unit to buy. c. $0 cost or savings per unit. d. $9.50 cost per unit. e. $4.30 savings per unit.

Peterson Manufacturing can produce a component of its product that incurs the following costs per unit: Direct materials: $12.50 • Direct labor: $16.20 • Variable overhead: $4.30 • Fixed overhead: $9.50 An outside supplier has offered to sell the product to Peterson for $42.00 per unit. Compute the net incremental cost or savings of buying the component. a. $4.30 cost per unit. b. $9.00 more per unit to buy. c. $0 cost or savings per unit. d. $9.50 cost per unit. e. $4.30 savings per unit.

Cornerstones of Cost Management (Cornerstones Series)

4th Edition

ISBN:9781305970663

Author:Don R. Hansen, Maryanne M. Mowen

Publisher:Don R. Hansen, Maryanne M. Mowen

Chapter20: Inventory Management: Economic Order Quantity, Jit, And The Theory Of Constraints

Section: Chapter Questions

Problem 3CE: Patz Company produces two types of machine parts: Part A and Part B, with unit contribution margins...

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Patz Company produces two types of machine parts: Part A and Part B, with unit contribution margins of 300 and 600, respectively. Assume initially that Patz can sell all that is produced of either component. Part A requires two hours of assembly, and B requires five hours of assembly. The firm has 300 assembly hours per week. Required: 1. Express the objective of maximizing the total contribution margin subject to the assembly-hour constraint. 2. Identify the optimal amount that should be produced of each machine part and the total contribution margin associated with this mix. 3. What if market conditions are such that Patz can sell at most 75 units of Part A and 60 units of Part B? Express the objective function with its associated constraints for this case and identify the optimal mix and its associated total contribution margin.
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