Desert Industries manufactures 5,000 units of Part X300 each month for use in pro- duction. The facilities
Question:
Desert Industries manufactures 5,000 units of Part X300 each month for use in pro- duction. The facilities now being used to produce Part X300 have fixed monthly overhead costs of \($40,000,\) and a theoretical capacity to produce 7,000 units per month. If Desert were to buy Part X300 from an outside supplier, the facilities would be idle and 80% of the fixed costs would continue to be incurred. There are no alternative uses for the production facilities. The variable production costs of Part X300 are \($24\) per unit. Fixed overhead is allocated based on planned production levels. If Desert Industries continues to use 5,000 units of Part X300 each month, it would realize a net benefit by purchasing Part X300 from an outside supplier only if the supplier's unit price is less than what amount?
Step by Step Answer:
Managerial Accounting For Undergraduates
ISBN: 9780357499948
2nd Edition
Authors: James Wallace, Scott Hobson, Theodore Christensen