Question
Arches Manufacturing had always made its components in-house. However, Canyonlands Component Works had recently offered to supply one component, DA, at a price of $52
Arches Manufacturing had always made its components in-house. However, Canyonlands Component Works had recently offered to supply one component, DA, at a price of $52 each. Arches uses 12,500 units of component DA each year. The cost per unit of this component is as follows:
Line Item Description | Amount |
---|---|
Direct materials | $25.00 |
Direct labor | 6.25 |
Variable overhead | 15.75 |
Fixed overhead | 7.00 |
Total | $54.00 |
Assume that 80% of Arches Manufacturing's fixed overhead for component DA would be eliminated if that component were no longer produced.
3. Conceptual Connection: By what dollar amount would the per-unit relevant fixed cost have to decrease before Arches would be indifferent (i.e., incur the same cost) between "making" versus "purchasing" the component? fill in the blank 1 of 1$
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started