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Emil Manufacturing incurs unit costs of $8.10 ($5.10 variable and $3.00 fixed) in making a sub-assembly part for its finished product. A supplier offers
Emil Manufacturing incurs unit costs of $8.10 ($5.10 variable and $3.00 fixed) in making a sub-assembly part for its finished product. A supplier offers to make 19,800 of the parts for $5.70 per unit. If it accepts the offer, Emil will save all variable costs and $1 of fixed costs. Prepare an analysis showing the total cost savings, if any, that Emil will realize by buying the part. (Round per unit answers to 2 decimal places, e.g. 15.25. If an amount reduces the net income then enter with a negative sign preceding the number, e.g. -15,000 or parenthesis, e.g. (15,000).) Number of units: Variable manufacturing costs Fixed manufacturing costs Purchase price Total annual cost The decision should be to buy the part 19800 Per Unit Make $ 5.10 $ 100980 1.00 5.70 19800 120780 i
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