Provide answer in table format Gelb Company currently manufactures 44,000 units per year of a key component for its manufacturing process. Variable costs are $6.25 per unit, fixed costs related to making this component are $77,000 per year, and allocated fixed costs are $61,500 per year. The allocated fixed costs are unavoidable whether the company makes or buys this component. The company is considering buying this component from a supplier for $3.70 per unit. Calculate the total incremental cost of making 44,000 units and buying 44,000 units. Should it continue to manufacture the component, or should it buy this component from the outside supplier?
Variance Analysis
In layman's terms, variance analysis is an analysis of a difference between planned and actual behavior. Variance analysis is mainly used by the companies to maintain a control over a business. After analyzing differences, companies find the reasons for the variance so that the necessary steps should be taken to correct that variance.
Standard Costing
The standard cost system is the expected cost per unit product manufactured and it helps in estimating the deviations and controlling them as well as fixing the selling price of the product. For example, it helps to plan the cost for the coming year on the various expenses.
Provide answer in table format
Gelb Company currently manufactures 44,000 units per year of a key component for its manufacturing process. Variable costs are $6.25 per unit, fixed costs related to making this component are $77,000 per year, and allocated fixed costs are $61,500 per year. The allocated fixed costs are unavoidable whether the company makes or buys this component. The company is considering buying this component from a supplier for $3.70 per unit.
Calculate the total incremental cost of making 44,000 units and buying 44,000 units. Should it continue to manufacture the component, or should it buy this component from the outside supplier?
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