Exercise 23-4 Make or buy decision LO A1

Gilberto Company currently manufactures 40,000 units per year of one of its crucial parts. Variable costs are $2.40 per unit, fixed costs related to making this part are $40,000 per year, and allocated fixed costs are $30,000 per year. Allocated fixed costs are unavoidable whether the company makes or buys the part. Gilberto is considering buying the part from a supplier for a quoted price of $3.60 per unit guaranteed for a three-year period. Calculate the total incremental cost of making 40,000 and buying 40,000 units. Should the company continue to manufacture the part, or should it buy the part from the outside supplier?

Complete this question by entering your answers in the tabs below.

Complete this question by entering your answers in the tabs below. Outside Costs to Make Costs to BuySupplier Calculate the total incremental cost of making 40,000 units. (Round cost per unit answer to 2 decimal places.) Incremental Costs to Make Relevant Amount per Unit Relevant fixed costs Total relevant costs Fixed manufacturing costs Variable cost per unit Total incremental cost to make Costs to Buy> Costs to Make