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An explanation would be greatly appreciated EXERCISE IV. Foster Company makes 20,000 units por year of a part it uses in the products it manufaatures.
An explanation would be greatly appreciated
EXERCISE IV. Foster Company makes 20,000 units por year of a part it uses in the products it manufaatures. The unit produot cost of this part is computed as follows: Direct labor Variable manufacturing overhead .. Fixed manufacturing overhead 13.40 ...16.30 2.30 An outside supplier has ofEered to sell the company all of these parts it needs for $51.80 a unit. If the company accepts this offer, the facilities now being used to make the part could be used to make more units of a product that is in high demand. The additional contribution margin on this other produet would be $44,000 per year If the part were purchased from the outside supplier, all of the direct labor cost of the part would be avoided. However $5.10 of the fixed manufacturing overhead cost being applied to the part would eontinue oven if the part were purchased from the outside supplier. This fixed manufacturing overhead cost would be applied to the company's romaining products. Required a. How much of the unit product cost of $56.70 is relevant in the decision of whether to make or buy the part? purchasing the part rather than making it? pay an outside supplier per unit for the part if the supplier b. What is the net total dollar advantage (disadvantage) of c. What is the maximum amount the company should be willing to commits to supplying al1 20,000 units required each year Step by Step Solution
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