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I would like to know if I am on the right track with the solution for number 3. 3 Suppose that if the motors were
I would like to know if I am on the right track with the solution for number 3.
3 | Suppose that if the motors were purchased, Fresnos could use the freed capacity to launch a new product. The segment margin of the new product would be $99,380 per year. Calculate the total benefit or detriment to continue making the motor if you consider the additional margin from the new product. Would this impact your decision in part 2? | |||||||||||
Make | Buy | |||||||||||
Make | Buy | Direct material | 128700 | |||||||||
Total Cost per part 1: | $ 462,600 | $ 457,600 | Direct labor | 157300 | ||||||||
Opportunity Cost: | $ 99,380 | $ 94,380 | Variable overhead | 42900 | ||||||||
Total Cost: | $ 363,220 | $ 368,220.00 | Fixed overhead Traceable (85800*40%) | 34320 | ||||||||
Opportunity cost | 99380 | |||||||||||
Total Benefit to Buy = | $ 5,000 | Purchase cost (14300*32) | 457600 | |||||||||
Total relevant cost | 462600 | 457600 |
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