Unit cost Direct materials $15.70 Direct Labor 17.50 Variable manufacturing over
ID: 2443515 • Letter: U
Question
Unit costDirect materials $15.70
Direct Labor 17.50
Variable manufacturing overhead 4.50
Fixed manufacturing overhead 14.60
Total unit product cost =$52.30
Company can buy the part for 51.90. if the company accepts, the facilities will be used to make a product that is in high demand. The additional contribution margin on the other product is $219,000. If purchased, all of direct labor cost would be avoided. However, $6.20 of fixed manufacturing overhead cost being applied to part would continue even if purchased. The fixed manufacturing overhead cost would be applied to company's remaining products.
Explanation / Answer
Per Unit For 30000 Units Direct Materials 15.7 471000 Direct Labour 17.5 525000 Manuafacturing Overhead 4.5 135000 Total Variable cost 37.7 1131000 Fixed Cost 14.6 438000 Total Cost 52.3 1569000 Fixed Cost (Un changed cost) 6.2 Expenditure for producing 46.1 1383000 If it purchase 51.9 1557000a. Per Unit For 30000 Units Direct Materials 15.7 471000 Direct Labour 17.5 525000 Manuafacturing Overhead 4.5 135000 Total Variable cost 37.7 1131000 Fixed Cost 14.6 438000 Total Cost 52.3 1569000 Fixed Cost (Un changed cost) 6.2 Expenditure for producing 46.1 1383000 If it purchase 51.9 1557000 If we want to buy from others it should be lower than $46.1 per unit, it is our production cost, Because if we change production this cost will be change. So we have to considere this amount only to make or buy decission. b. Company can pay maximum amount $46.1 per unit, and $1383000 per 30000 Units. Fixed Cost $6.2 is constant for every time if we produced or not. So these amount is not considered. If we accept above order we have to loose another products contribution also. Thank you........
Per Unit For 30000 Units Direct Materials 15.7 471000 Direct Labour 17.5 525000 Manuafacturing Overhead 4.5 135000 Total Variable cost 37.7 1131000 Fixed Cost 14.6 438000 Total Cost 52.3 1569000 Fixed Cost (Un changed cost) 6.2 Expenditure for producing 46.1 1383000 If it purchase 51.9 1557000
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