Every yearRiverbedIndustries manufactures7,300units of part 231 for use in its production cycle. The per unit costs of part 231 are as follows:

Direct materials$5.00Direct labor11.00Variable manufacturing overhead6.00Fixed manufacturing overhead10.00Total$32.00

Ivanhoe, Inc., has offered to sell7,300units of part 231 toRiverbedfor $34per unit. IfRiverbedacceptsIvanhoe's offer, its freed-up facilities could be used to earn $10,500in contribution margin by manufacturing part 240. In addition,Riverbedwould eliminate40% of the fixed overhead applied to part 231.

(a)Calculate total relevant cost to make and net cost to buy.

(a)Calculate total relevant cost to make and net cost to buy.

Total relevant cost to make $

Net relevant cost to buy $

(b)ShouldRiverbedacceptIvanhoe's offer?

yes no