Sage Company is operating at 90% of capacity and is currently purchasing a part used in its manufacturing operations for $18.00 per unit. The unit cost for the business to make the part is $22.00, including fixed costs, and $9.00, not including fixed costs. If 32,786 units of the part arenormally purchased during the year but could be manufactured using unused capacity, the amount of differential cost increase or decrease from making the part rather than purchasing it would be aOa. $590,148 cost decreaseOb. $295,074 cost decreaseOc. $131,144 cost increaseOd. $295,074 cost increase

Step 1: Differential cost increase or decrease can be calculated as the difference in the relevant…

Answered: Sage Company is operating at 90% of…

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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Sage Company is operating at 90% of capacity and is currently purchasing a part used in its manufacturing operations for $14.00 per unit. The unit cost for the business to make the part is $22.00, including fixed costs, and $11.00, excluding fixed costs. If 39,879 units of the part are normally purchased during the year but could be manufactured using unused capacity, what would be the amount of differential cost increase or decrease from making the part rather than purchasing it? a.$558,306 cost decrease b.$119,637 cost increase c.$319,032 cost increase d.$119,637 cost decrease
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