Question
Monthly production costs for 125,000 units are as follows: Direct materials $ 535,000 Direct labor $ 287,500 Variable overhead costs $ 365,000 Fixed overhead costs
Monthly production costs for 125,000 units are as follows: Direct materials $ 535,000 Direct labor $ 287,500 Variable overhead costs $ 365,000 Fixed overhead costs $ 156,250 Total Costs $ 1,343,750 It is estimated that 30% of the fixed overhead costs assigned to PTQR-MFID will no longer be incurred if the company purchases PTQR-MFID from an outside supplier. The company has the option of purchasing the part from an outside supplier at $9.25 per unit. 4. If the Company accepts the offer from the outside supplier, calculate the monthly avoidable costs. If the company purchases 125,000 PTQR-MFID parts from the outside supplier per month, calculate the increase/(decrease) in monthly operating income. Be sure to state if the amount will be an increase or decrease. Calculate the maximum per-unit price that the company should be willing to pay an outside supplier for a PTQR-MFID (round to two decimal places). Within the relevant range, a cost which changes on a per unit basis is __________________________.
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started