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Direct materials $ 5.10 Direct labor 7.00 Variable manufacturing overhead 3.50 Fixed manufacturing overhead 9.00 Total cost per part $ 24.60 An outside supplier has
Direct materials $ 5.10 Direct labor 7.00 Variable manufacturing overhead 3.50 Fixed manufacturing overhead 9.00 Total cost per part $ 24.60 An outside supplier has offered to sell 19,000 units of part R-3 each year to Royal Company for $22.60 per part. If Royal Company accepts this offer, the facilities now being used to manufacture part R-3 could be rented to another company at an annual rental of $73,000. However, Royal Company has determined that $6 of the fixed manufacturing overhead being applied to part R-3 would continue even if part R-3 were purchased from the outside supplier. Required: a. What is the total relevant cost of making the product? Total relevant cost of making the product (19,000 units) $ b. What is the total relevant cost of buying the product? Total relevant cost of buying the product (19,000 units) $ c. What is the opportunity cost of making instead of buying? Total opportunity cost $
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