Golden Inc. has been manufacturing 5,000 units of Part 10541 per year. It is used in...

   

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Golden Inc. has been manufacturing 5,000 units of Part 10541 per year. It is used in the manufacture of one of its products. At this level of production, the cost per unit of manufacturing Part 10541 is as follows: Direct materials Direct labor Variable overhead Fixed overhead Total $2.00 8.00 4.00 6.00 $20.00 Brown Company has offered to sell Golden 5,000 units of Part 10541 for $19 per unit. Golden has determined that it could use the facilities presently used to manufacture Part 10541 to manufacture Product RAC and generate an operating profit of $14,000. Golden also has determined that one-third of the fixed overhead will continue to be incurred even if Part 10541 is purchased from Brown. What is the incremental profit or loss associated with purchasing the part? Golden Inc. has been manufacturing 5,000 units of Part 10541 per year. It is used in the manufacture of one of its products. At this level of production, the cost per unit of manufacturing Part 10541 is as follows: Direct materials Direct labor Variable overhead Fixed overhead Total $2.00 8.00 4.00 6.00 $20.00 Brown Company has offered to sell Golden 5,000 units of Part 10541 for $19 per unit. Golden has determined that it could use the facilities presently used to manufacture Part 10541 to manufacture Product RAC and generate an operating profit of $14,000. Golden also has determined that one-third of the fixed overhead will continue to be incurred even if Part 10541 is purchased from Brown. What is the incremental profit or loss associated with purchasing the part?

Answer rating: 100% (QA)

To determine the incremental profit or loss associated with purchasing Part 10541 from Brown Company instead of manufacturing it inhouse we need to co... View the full answer