Question
Sage Company is operating at 90% of capacity and is currently purchasing a part used in its manufacturing operations for $16.00 per unit. The unit
Sage Company is operating at 90% of capacity and is currently purchasing a part used in its manufacturing operations for $16.00 per unit. The unit cost for the business to make the part is $20.00, including fixed costs, and $10.00, excluding fixed costs. If 37,554 units of the part are normally purchased during the year but could be manufactured using unused capacity, what would be the amount of differential cost increase or decrease from making the part rather than purchasing it?
a. $150,216 cost increase
b. $225,324 cost increase.
c. $225,324 cost decrease.
d. $600,864 cost decrease.
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Accounting concepts and applications
Authors: Albrecht Stice, Stice Swain
11th Edition
978-0538750196, 538745487, 538750197, 978-0538745482
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