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 $21.00, including fixed costs, and $9.00, not including fixed costs. If 38,241 units of the part are normally 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 a a. $191,205 cost decrease b. $267,687 cost increase c. $191,205 cost increase d. $535,374 cost decrease
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 $21.00, including fixed costs, and $9.00, not including fixed costs. If 38,241 units of the part are normally 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 a a. $191,205 cost decrease b. $267,687 cost increase c. $191,205 cost increase d. $535,374 cost decrease
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Subject :- Accounting
Transcribed Image Text: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 $21.00, including fixed costs, and $9.00, not including fixed costs.
If 38,241 units of the part are normally 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 a
a. $191,205 cost decrease
b. $267,687 cost increase
c. $191,205 cost increase
d. $535,374 cost decrease
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