ch23 0 Saved Factor Co. can produce a unit of product for the following costs s7

Question

ch23 0 Saved Factor Co. can produce a unit of product for the following costs s7.80 23.8? 39.80 Direct material Direct labor 00Overhead Total costs per unit $78.60 An outside supplier offers to provide Factor with all the units it needs at $45 20 per unit if Factor buys from the supplier, the company wi Pint Factor buys from the supplier, the company will still incur 60% of its overhead Factor should choose to: Multiple Choice Buy since the relevant cost to make in is $5500. Make since the relevant cost to make it is $4720 Buy since the relevent cost to make it is $4720. Make since the releverm cost to make t is $3160 Buy since the relevant cost to make it s $3160 Pruv 1 of 10Next>

Explanation / Answer

1)correct option is "A"

Cost to make = 7.8+23.8+ [39*.60]

                           7.8 +23.8 +23.4

                              $ 55

since cost to buy is less than cost to make ,decision is Buy

2)correct option is "D"

since fixed overhead cost will be incurred whether purchased or make internally thus it is irrelevant .

relevant cost to make = 9.8+13.8+2.8=26.4

incremental cost to but = 34.2-26.4=7.8

3)Incremental profit /(loss) from reworking=1000[12.6-2.7]= 9900

correct option is D"

4)correct option is "B" -36000 income

incremental income from reworking = 3000[23-5-6]=36000

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