Foto Company makes 20000 units per year of a part it uses in the products it man

Question

Foto Company makes 20000 units per year of a part it uses in the products it manufactures The unit product cost of this part is computed as tollows Direct materias Direct labor25 S9 Fixed manufacturing overhead. .20 Unit product cost t the part were purchased trom the outside supplier, al of the direct labor cost of the part would be avoided. However, $4 of the fxed manufacturing overhead cost being applied to the part would cotinue oven if the part were purchased from the outside supplier This fixed manfacturing overhead would be appled to tho company's remaining products. what is the most (per unit) hat Foto Company should be willing to pay an outsider to buy the part?

Explanation / Answer

As we are well aware that fixed costs will remain constant , we have to consider other factors and therefore, the Foto company should be willing to pay $34, I.e .25+9$ for a unit to be purchased from outside because here the labour cost is eliminated and only material and variable manufacturing overheads are considered and fixed cost is not considered as it remains constant at any level of production.

Related Questions

Navigate

• Browse (All)
• Browse F
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.