Question
super Center produces a part (product A) that is used in the manufacture of one of its products. The unit manufacturing costs of this part,
super Center produces a part (product A) that is used in the manufacture of one of its products. The unit manufacturing costs of this part, assuming a production level of 12,000 units, are as follows:
Direct materials | $35.00 |
Direct labour | $12.00 |
Variable manufacturing overhead | $7.00 |
Fixed manufacturing overhead | $6.00 |
Total cost | $60.00 |
The fixed overhead costs are unavoidable. |
|
Assume Home Center can purchase 12,000 units of the part (product A ) from Tech Company for $56.00 each, and the facilities currently used to make the part could be used to manufacture 12,000 units of another (product B) that would have an $3 per unit contribution margin. If no additional fixed costs would be incurred, what should Home Center do?
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