For many years Futura Company has purchased the starters that it installs in its standard line of farm tractors. Due to a reduction in output, the company has idle capacity that could be used to produce the startars. The chief engineer has recommended egainat thia move, however. pointing out thet the coet to produce the startera would be greater than the current $10.60 per unit purchase price Per Unil Tolal $5.DD 2.80 1.0 $119,000 1.20 S 84,000 0.60 Cirect materisls Direct lator Superviscn Depreciation ariabe manufacturing overhoad Hent 4S 28,000 11.70 Total prodiuct cost A supervisor would have to be hired to oversee production of the starters. However, the company has sufficient idle tools and machinery so that rio new equipment would have to be purchased. The rent charge above is based on space utilizod in the plant. The total rant on the plant is $85,000 per periad. Depreciation ia due to obsolescence rather than wear and tear. Required: 1. Dstermine the total ralevant cost per unit if starters are made inside the compsny. (Round your answer to 2 decimal places.) 2. Determine the total relevant cst per unit if starters are purchased trom an outside supplier. Round your answer to 2 decimal places.) t cost per urit 3. What is the increase or decrease in profits as a result of purchasing the starters from an outside supplier rather than making them inside the company? (Do not round intermediate calculations. Round your answar to the nearest dollar amount) For many years Futura Company has purchased the starters that it installs in its standard line of farm tractors. Due to a reduction in output, the company has idle capacity that could be used to produce the startars. The chief engineer has recommended egainat thia move, however. pointing out thet the coet to produce the startera would be greater than the current $10.60 per unit purchase price Per Unil Tolal $5.DD 2.80 1.0 $119,000 1.20 S 84,000 0.60 Cirect materisls Direct lator Superviscn Depreciation ariabe manufacturing overhoad Hent 4S 28,000 11.70 Total prodiuct cost A supervisor would have to be hired to oversee production of the starters. However, the company has sufficient idle tools and machinery so that rio new equipment would have to be purchased. The rent charge above is based on space utilizod in the plant. The total rant on the plant is $85,000 per periad. Depreciation ia due to obsolescence rather than wear and tear. Required: 1. Dstermine the total ralevant cost per unit if starters are made inside the compsny. (Round your answer to 2 decimal places.) 2. Determine the total relevant cst per unit if starters are purchased trom an outside supplier. Round your answer to 2 decimal places.) t cost per urit 3. What is the increase or decrease in profits as a result of purchasing the starters from an outside supplier rather than making them inside the company? (Do not round intermediate calculations. Round your answar to the nearest dollar amount)
