Question
Gilberto Company currently manufactures 65,000 units per year of one of its crucial parts. Variable costs are $1.95 per unit, fixed costs related to making
Gilberto Company currently manufactures 65,000 units per year of one of its crucial parts. Variable costs are $1.95 per unit, fixed costs related to making this part are $75,000 per year, and allocated fixed costs are $62,000 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 $3.25 per unit guaranteed for a three-year period. Calculate the total incremental cost of making 65,000 units. (Round cost per unit answer to 2 decimal places.) Calculate the total incremental cost of buying 65,000 units. (Round cost per unit answer to 2 decimal places.) Should the company continue to manufacture the part, or should it buy the part from the outside supplier? Buy Make
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