Retail Industries can manufacture a machine part internally at the following costs per unit: . Direct Materials = $15.20 . Direct Labor = $18.40 • Variable Overhead = $5.10 • Fixed Overhead = $10.50 (Not relevant unless avoidable) • An external supplier offers to sell the part for $43.50 per unit. Compute the net incremental cost or savings of buying the part.

Retail Industries can manufacture a machine part internally at the following costs per unit: . Direct Materials = $15.20 . Direct Labor = $18.40 • Variable Overhead = $5.10 • Fixed Overhead = $10.50 (Not relevant unless avoidable) • An external supplier offers to sell the part for $43.50 per unit. Compute the net incremental cost or savings of buying the part.

Managerial Accounting: The Cornerstone of Business Decision-Making

7th Edition

ISBN:9781337115773

Author:Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger

Publisher:Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger

Chapter7: Cost-volume-profit Analysis

Section: Chapter Questions

Problem 58P: Polaris Inc. manufactures two types of metal stampings for the automobile industry: door handles and...

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Suppose that a manufacturer can produce a part for $11.00 with a fixed cost of $7,000. Alternately, the manufacturer could contract with a supplier in Asia to purchase the part at a cost of $13.00, which includes transportation. a. If the anticipated production volume is 1,300 units, compute the total cost of manufacturing and the total cost of outsourcing. b. What is the best decision? a. The total cost of manufacturing is $.
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