Make-or-buy and relevant costs The assembly division of Davenport, Inc.,

is bidding on an order of 50,000 smart phones. The division is eager to get

this order because it has a substantial amount of unused plant capacity. The

variable cost for each smart phone is $140 in addition to the cost of the

display and touchscreen component. The divisional purchasing manager has

received two bids for the component. One is from Davenport's electronics

division. This bid is for $35 per unit, although its variable cost is only $30 per

unit. The other is from an outside vendor for $34 per unit. Davenport's

electronics division has sufficient unused capacity for this order.

Required

(a) Determine the relevant costs for this order for the assembly division under both internal and

outsourcing arrangements.

Make-or-buy and relevant costs The assembly division of Davenport, Inc.,

is bidding on an order of 50,000 smart phones. The division is eager to get

this order because it has a substantial amount of unused plant capacity. The

variable cost for each smart phone is $140 in addition to the cost of the

display and touchscreen component. The divisional purchasing manager has

received two bids for the component. One is from Davenport's electronics

division. This bid is for $35 per unit, although its variable cost is only $30 per

unit. The other is from an outside vendor for $34 per unit. Davenport's

electronics division has sufficient unused capacity for this order.

Required

(a) Determine the relevant costs for this order for the assembly division under both internal and

outsourcing arrangements.

PART OF MY ANSWER BUT I AM NOT SURE IF THERE ARE ANY ADDITIONAL RELEVANT COST FOR INTERNAL OR IT THIS IS CORRECT.

Internal Relevant cost

50,000 Smartphones x $140 variable Cost = $7,000,000

(b) Determine the relevant costs for this order for Davenport as a company under each of the

sourcing arrangements

(b) Determine the relevant costs for this order for Davenport as a company under each of the

sourcing arrangements