Question
Gent Designs requires three units of part A for every unit of A1 that it produces. Currently, part A is made by Gent, with these
Gent Designs requires three units of part A for every unit of A1 that it produces. Currently, part A is made by Gent, with these per-unit costs in a month when 4,200 units were produced:
Direct materials | $4.00 |
Direct labor | 1.50 |
Manufacturing overhead | 1.30 |
Total | $6.80 |
Variable manufacturing overhead is applied at $1.00 per unit. The other $0.30 of overhead consists of allocated fixed costs. Gent will need 6,100 units of part A for the next years production.
Cory Corporation has offered to supply 6,100 units of part A at a price of $7.00 per unit. If Gent accepts the offer, all of the variable costs and $1,260 of the fixed costs will be avoided.
A. Calculate the differential cost?
Cost to buy | |
Cost to make | |
Differential cost |
B. Underground Food Store has 5,000 pounds of raw beef nearing its expiration date. Each pound has a cost of $4.50. The beef could be sold "as is" for $3.00 per pound to the dog food processing plant, or roasted and sold in the deli. The cost of roasting the beef will be $2.80 per pound, and each pound could be sold for $6.40. What should be done with the beef, and why? If required, round final answers to two decimal places.
The beef should be processed further since the sales price increases by _____ per pound and the cost only increases by ______ per pound.
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