please show formula and solution. Thank you. Exercise 8-8 LINK TO TEXT LINK TO V

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please show formula and solution. Thank you.

Exercise 8-8

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Exercise 8-8

The Bramble Company manufactures 1,000 units of a part that could be purchased from an outside supplier for $13 each. Bramble’s costs to manufacture each part are as follows:
Direct materials $2 Direct labor 4 Variable manufacturing overhead 3 Fixed manufacturing overhead 9   Total $18
All fixed overhead is unavoidable and is allocated based on direct labor. The facilities that are used to manufacture the part have no alternative uses.

Explanation / Answer

Solution a:

Solution b:

Cost of buying alternative is higher than make alternative, hence company should manufacture the part.

Solution c:

If manufacturing facility could be lease to another company for buy alternative, then net cost to buy = $13,000 - $5,550 = $7,450

Solution d:

As cost of buying alternative is lesser than cost of make alternative, hence company should buy the part.

Computation of relevant cost to make - Bramble Company Particulars Per unit Direct material $2.00 Direct labor $4.00 Variable manufacturing overhead $3.00 Relevant cost per unit $9.00

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