actor Co. can produce a unit of product for the following costs: Direct material $ 8.60 Direct labor 24.60 Overhead 43.00 Total product cost per unit $ 76.20 An outside supplier offers to provide Factor with all the units it needs at $48.40 per unit. If Factor buys from the supplier, the company will still incur 60% of its overhead. Factor should choose to:

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Answer 1

Answer:

Relevant cost to make = Direct materials + Direct labor + Variable overhead

Relevant cost to make = $8.60 + $24.60 + $43.00 (1-60%)

Relevant cost to make = $8.60 + $24.60 + $17.20

Relevant cost to make = $50.40

Outside supplier cost ($48.40) < Relevant cost to make ($50.40). So, Factor should choose to buy because the relevent cost is less than outside supplier cost.


Related Questions

Examine a product that has recently changed prices when you were at the grocery store in the past week. Analyze one determinant of supply and demand that has created the price to increase or decrease in your example. How did the change in demand or supply affect the market price in your example

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Answer:

In the store the bread seemed to have a higher demand this week. When we went monday the shelfs were full of bread and the bread was 3.75 and when we went saturday it was 3.99. I think because it was in higher demand the bread went uo in cost so they wouldn't sell out.

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