Eastside Company incurs a total cost of $ 1 2 0 , 0 0 0 in producing
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Question:
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Eastside Company incurs a total cost of $ in producing units of a component needed in the assembly of its major product. The component can be purchased from an outside supplier for $ per unit. A related cost study indicates that the total cost of the component includes fixed costs equal to of the variable costs involved.
a Should Eastside buy the component if it cannot otherwise use the released capacity? Present your answer in the form of differential analysis.
Use negative sign represent a net disadvantage answer; otherwise do not use negative signs with your answers.
Cost from outside supplier
Variable costs avoided by purchasing
Net advantage disadvantage to purchase alternative
b What would be your answer to requirement a if the released capacity could be used in a project that would generate $ of contribution margin?
Use negative sign represent a net disadvantage answer; otherwise do not use negative signs with your answers.
Cost from outside supplier
Variable costs avoided by purchasing
Contribution margin generated by new project
Net advantage disadvantage to purchase alternative
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