Gandolfi Company manufactures a part for use in its production of automobiles. When 10,000 items are produced, the costs per unit are:

Direct materials………………………………………..$ 12

Direct manufacturing labor……………………………...60

Variable manufacturing overhead………………………24

Fixed manufacturing overhead…………………………32

Total………………………………………………….$128

Super company has offered to sell Gandolfi company 10,000 units of the part for $120 per unit. The plant facilities could be used to manufacture another part at a savings of $180,000 if Gandolfi accepts the supplier's offer. in addition, $20 per unit of fixed manufacturing overhead on the original part would be eliminated.

Required:

a. What is the relevant per unit cost for the original part?

b. Which alternative is best for Gandolfi Company? By how much?

Answer rating: 100% (QA)

a Cost savings from use of facilities 18 Direct mate... View the full answer