coura Contents» » SECOND CHANCE EXAM 2uestion 1 X Company currently buys a part

Question

coura Contents» » SECOND CHANCE EXAM 2uestion 1 X Company currently buys a part from a supplier for $11.37 per unit but is considering making the part itself next year. This year, they purchased 3,200 units of this part; next year, they think they will need 3,600 units. Estimated costs to make the part are: Direct materials Direct labor Varlable overhcad Fixed owerhead Total $3.29 3.09 2.60 3.40 $12.38 Total 10,528 9,888 8,320 10,880 $39,616 of the estimated fixed overhead, $4,797 are common coats that would be allocated to the part; the rest would be additional fixed averhead costs. X Company currently rents unused factory space for $2,800; it will have to use this space to make the part. If X Company continues to buy the part instead of making it, w save Tries 4/5 Previous Tries

Explanation / Answer

CALCUALTION OF COST OF MAKING THE PRODUCT INSIDE THE FACTORY Particulars Amount Total Unit   Total Cost Remarks Direct Materials                        3.29           3,200.00         10,528.00 Variable Cost Direct Labours                        3.09           3,200.00            9,888.00 Variable Cost Vraible Overhead                        2.60           3,200.00            8,320.00 Variable Cost Fixed Overhead as Opportunity Cost                          2.78           3,200.00            8,893.00 Opportunity Cost ($ 8,893 / 3200 Units) Total Cost per unit                      11.76 Per unit Cost         37,629.00 CALCULATION OF THE COST OF SAVING ON PURHCASES Total Cost of Manufacture=                      11.76 Per unit Cost Less: Purchasing Price =                      11.37 Per unit Purchase Price Save per unit if they continue to buy                        0.39 Saving Per unit Total Units required for Purchase                3,200.00 units Total Saving =                1,245.00 CALCULATION OF TOTAL RELATED FIXED COST Total Fixed Cost =             10,880.00 Less: Common Cost =                4,787.00 Add: Opportunity Cost =                2,800.00 Total Fixed Cost =                8,893.00 Total Expected units to be produced =                3,200.00 units Cost per unit =                        2.78 Answer If contiinue to buy the parts instead of making it then they will save = $ 1245

Related Questions

Navigate

• Browse (All)
• Browse C
• Subjects

---

---

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