Tyler Industries currently manufactures one of its crucial parts at a cost of $4.50 per unit. This cost is based on a normal production rate of 50,000 units per year. Direct materials and direct labor costs are $2.50 per unit and incremental overhead costs related to making this part are $50,000 per year. Allocated fixed costs are unavoidable whether the company makes or buys the part. Tyler is considering buying the part from a supplier for a quoted price of $3.70 per unit, guaranteed for a three-year period. What is the relevant cost of making the 50,000 units?

Tyler Industries currently manufactures one of its crucial parts at a cost of $4.50 per unit. This cost is based on a normal production rate of 50,000 units per year. Direct materials and direct labor costs are $2.50 per unit and incremental overhead costs related to making this part are $50,000 per year. Allocated fixed costs are unavoidable whether the company makes or buys the part. Tyler is considering buying the part from a supplier for a quoted price of $3.70 per unit, guaranteed for a three-year period. What is the relevant cost of making the 50,000 units?

Managerial Accounting

15th Edition

ISBN:9781337912020

Author:Carl Warren, Ph.d. Cma William B. Tayler

Publisher:Carl Warren, Ph.d. Cma William B. Tayler

Chapter11: Differential Analysis And Product Pricing

Section: Chapter Questions

Problem 3CMA: Aril Industries is a multiproduct company that currently manufactures 30,000 units of Part 730 each...

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