Kingston Company, which needs 10,000 units of a certain part to be used in its production cycle, can make or buy the part. If Kingston buys the part from Utica Company, Kingston could not use the released facilities in another manufacturing activity within the coming year. 60% of the fixed overhead applied will continue regardless of which decision option is chosen. The following per-unit cost information to make the part by Kingston is available: Direct materials $ 31 Direct labor 124 Variable overhead 62 Fixed overhead applied 78 $ 295 Cost to buy the part from Utica Company $ 79 In deciding whether to make or buy the part, Kingston's total relevant cost to make the part would be: Multiple Choice $2,344,000. $2,482,000. $790,000. $2,950,000. Some amount other than these choices
Kingston Company, which needs 10,000 units of a certain part to be used in its production cycle, can make or buy the part. If Kingston buys the part from Utica Company, Kingston could not use the released facilities in another manufacturing activity within the coming year. 60% of the fixed overhead applied will continue regardless of which decision option is chosen. The following per-unit cost information to make the part by Kingston is available: Direct materials $ 31 Direct labor 124 Variable overhead 62 Fixed overhead applied 78 $ 295 Cost to buy the part from Utica Company $ 79 In deciding whether to make or buy the part, Kingston's total relevant cost to make the part would be: Multiple Choice $2,344,000. $2,482,000. $790,000. $2,950,000. Some amount other than these choices
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Question
Kingston Company, which needs 10,000 units of a certain part to be used in its production cycle, can make or buy the part. If Kingston buys the part from Utica Company, Kingston could not use the released facilities in another manufacturing activity within the coming year. 60% of the fixed
| Direct materials | $ | 31 |
| Direct labor | 124 | |
| Variable overhead | 62 | |
| Fixed overhead applied | 78 | |
| $ | 295 | |
| Cost to buy the part from Utica Company | $ | 79 |
In deciding whether to make or buy the part, Kingston's total relevant cost to make the part would be:
Multiple Choice
-
$2,344,000.
-
$2,482,000.
-
$790,000.
-
$2,950,000.
-
Some amount other than these choices.
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