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Foster Company makes 35,000 units per year of a part that it uses in the products it manufactures. The unit product cost of this part
Foster Company makes 35,000 units per year of a part that it uses in the products it manufactures. The unit product cost of this part is computed as fodows Direct Labour $24.00 Variable Manufacturing Overhead $12.00 Direct Materials $6,00 Fixed Manufacturing overhead 512 20 55420 An outside supplier has offered to sell the company all the parts that Foster needs for $50.00 a unit. If the company accepts this offer the facilities now being used to make the part could be used to make more units of a product that is in high demand. The additional contribution margin on this other product would be $45.000 per year if the part were purchased from the outside supplier, all of the direct labour cost of the part would be avoided. However, $5.60 of the fixed manufacturing overhead cost that is being applied to the part would continue, even if the part were purchased from the outside supplier. This fixed manufacturing overhead cost would be applied to the company's remaining products Required a) How much of the unit product cost of $5420 is relevant in the decision of whether to make or buy the part? handeling disediakan bahan makinesi HP Required w How much of the unit product cost of $54,20 is relevant in the decision of whether to make or buy the part? b) What is the net total dollar advantage (disadvantages of purchasing the part rather than making it? What is the maximum amount the comparwy should be willing to pay an outside supplier per unit for the part if the supplier commits to supplying M 15.000 units required each year
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