Question
Lafluer Manufacturing incurs unit costs of $7.01 ($4.29 variable and $2.72 fixed) in making a sub-assembly part for its finished product. A supplier offers to
Lafluer Manufacturing incurs unit costs of $7.01 ($4.29 variable and $2.72 fixed) in making a sub-assembly part for its finished product. A supplier offers to make 15,000 of the assembly parts at $5.20 per unit. If the offer is accepted, Lafluer will save all variable costs but no fixed costs. Prepare an analysis showing the total cost saving, if any, Lafluer will realize by buying the part. (If answer is zero, please enter 0. Do not leave any fields blank. If amount decreases the income, use either a negative sign preceding the number eg -45 or parentheses eg (45).)
Make | Buy | Net Income Increase (Decrease) | |
Variable manufacturing costs | $ | $ | $ |
Fixed manufacturing costs | |||
Purchase price |
|
|
|
Total annual cost | $ | $ | $ |
The decision should be to the part.
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