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Grand Limited currently produces a component of a product with the following per unit production costs: Direct materials $18.00 Direct labour 32.50 Manufacturing overhead 21.00
Grand Limited currently produces a component of a product with the following per unit production costs: Direct materials $18.00 Direct labour 32.50 Manufacturing overhead 21.00 Grand Ltd. currently manufactures these components in-house, averaging production of 29,750 units each year. Asupplier has approached the company offering to supply 29,750 units each year at a cost of $45.50 each. 60% of the overhead is fixed and if Grand Ltd. purchases the components, then 1/3 of the xed overhead costs would be avoidable. What is Grand's net advantage to buying the component from the supplier? Answer: 64.36 x (523,600)
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