Question
Harold is considering whether to continue to make product A, or buy it completed from Rosie. Harold makes 200,000 of these units each year. Rosie
Harold is considering whether to continue to make product A, or buy it completed from Rosie. Harold makes 200,000 of these units each year. Rosie is offering to sell product A to Harold for $60 a unit. Below is some information concerning the product
variable costs - 200,000 units at $58 per unit = $11,600,000
fixed costs $ 600,000
What are relevant costs
a. variable costs per unit?
b. total fixed costs?
c. total dollar amount of cost or savings to Harold - note if cost or savings.
d. should Harold take this offer, yes or no?
On further review, Harold believes that If Rosie makes the product, production supervisors with salaries of $350,000 will be eliminated.
What are relevant costs
e. variable costs per unit?
f. total fixed costs?
g. total dollar amount of cost or savings to Harold - note if cost or savings.
h. should Harold take this offer, yes or no?
Name two other concerns for Harold if he takes this offer
i. _________________
j. _________________
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