Question
ABC company needs 15,000 components annually. So far, the company makes its own with production costs consisting of 1,500,000 raw materials, 2,400,000 direct labor, 900,000
ABC company needs 15,000 components annually. So far, the company makes its own with production costs consisting of 1,500,000 raw materials, 2,400,000 direct labor, 900,000 variable overheads and 1,200,000 fixed overheads. Fixed product overhead is the cost of facilities for producing components that cannot be used for other purposes. The company received an offer from an outside party to supply components from it at a price of 340 per unit. Based on the available information, what are the relevant costs for alternatives to buying from outside?
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