2 Gelb Company currently manufactures 47,500 units per year of a key component f

Question

2 Gelb Company currently manufactures 47,500 units per year of a key component for its manufacturing process Variable costs are $5.15 per unit, fixed costs related to making this component are $85,000 per year, and allocated fixed costs are $58,500 per year. The allocated fixed costs are unavoidable whether the company makes or buys this component. The company is considering buying this component from a supplier for $3.50 per unit. 15 points Calculate the total incremental cost of making 47,500 and buying 47,500 units. Should it continue to manufacture the component, or should it buy this component from the outside supplier? (Round "purchase price per unit" answer to decimal places.) eBook Complete this question by entering your answers in the tabs below. Hint Costs to Costs to Outside Bu Make Supplier Print Calculate the total incremental cost of making 47,500 units. (Round "variable cost per unit" answer to 2 decimal places.) References Incremental Costs to Make Relevant Relevant Total Amount Fixed Relevant per Unit Costs Costs Total incremental cost to make Costs to Make Costs to Buy >

Explanation / Answer

Incremental costs to make Relevant Amount per unit Relevant Fixed costs Total Relevant Costs Variable Cost 5.15 244,625 Fixed costs 85,000 85,000 Allocated fixed Costs Total Incremental cost to make 329,625 Incremental costs to Buy Relevant Amount per unit Relevant Fixed costs Total Relevant Costs Variable Cost 3.15 149,625 Fixed costs Allocated fixed Costs Total Incremental cost to buy 149,625 Purchase it from outside supplier

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