SOLVE ALL PROBLEMS RELATED TO THE QUESTIONS.

1. ABC Company, a manufacturing company, needs to determine if t would be cheaper to produce 5,000 units of a subassembly used in its main product or to purchase them from an outside supplier for $12 each. Cost information for the internal production follows $5.00 3.00 1.50 6.00 $15.50 Direct Materials Direct Labor Variable manufacturing overhead Fixed manufacturing overhead Total How much is the relevant unit cost for internal production? How much is the relevant unit cost for external purchase? Which alternative is more cost effective (make or purchase)? How much is the total cost savings tor the least cost alternative vs. the more expensive one? a. b. c. d. Now assume that 20% of the fixed manufacturing overhead is avoidable. / e. a. Which alternative is more cost effective now? b. How much is the cost savings for the least cost alternative vs. the more expensive . one? XYZ Company has been approached by a new customer in a different geographical part of the country to purcha 10,000 units of its product at a price of $6 each. Existing sales would not be affected by the acceptance of this order and XYZ has additional capacity available. The normal price for the product is $12 per unit. Unit cost information for the product follows 2. Direct Materials Direct Labor Variable manufacturing overhead Fixed manufacturing overhead $1.50 2.00 1.00 3.25 $7.75 Total a. How much is the relevant unit costs to heused in this decision? b. By how much will operating income increase or decrease If the order is accepted