Answer: D) Increase by $5300

Hi, can someone help me with this question, please? the solution is provided below and the answer is D. My question is why don't we include direct labor and indirect manufacturing as costs in the "Cost to Buy" section? Also, we multiplied the 12,000 x 25% because of 1/4 given but what about the 3/4 given?

- please help and thanks in advance!

The following data apply to questions 4 and 5. Troy Instruments uses ten units of Part Number S1798 each month in the production of scientific equipment. The unit cost to manufacturing one unit of S1798 is presented below. Direct materials $ 4,000 Materials handling (10% of direct materials cost) 400 Direct manufacturing labor 6,000 Indirect manufacturing (200% of direct labor) 12.000 Total manufacturing cost $22.400 Materials handling represents the direct variable costs of the Receiving Department that are applied to direct materials and purchased components on the basis of their cost. This is a separate charge in addition to indirect manufacturing cost. Troy's annual indirect manufacturing cost budget is one-fourth variable and three-fourths fixed. Duncan Supply, one of Troy's reliable vendors, has offered to supply Part Number S1798 at a unit price of $17,000 (CMA Adapted) If Troy purchases the S1798 units from Duncan, the capacity Troy used to manufacture these parts would be idle. Should Troy decide to purchase the parts from Duncan, the unit cost of S1798 would decrease by $3,700. b. decrease by $5,600. c. increase by $3,600. d. increase by $5,300. System.Configuration.configuration Manager. Prepare contig System at System.ConfiguCost to Makeration Cost to Buysh Section String Direct materials $4,000 Purchase of partntiguration Client Settingsst $17.000 ettings String Material handling Boolean 400 erscope 1,700 Direct labor 6,000 Sets Provider.GetProper 512000 x 25% Indirect manufacturing 3.000 Total $13.400 Property Colle 518 700 erties figuration Settings Base.GetPropertiesFromProvider Settings Difference in favor of making $5,300 at System Contiguration Settings Ease. GetProperty ValueName String