Question 5. Composite Company produces 2,000 parts per year, which are used in the assembly of...

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Question 5. Composite Company produces 2,000 parts per year, which are used in the assembly of one of its products. The unit product cost of these parts is: Variable manufacturing cost $64 Fixed manufacturing cost 36 Unit product cost $100 The part can be purchased from an outside supplier at $80 per unit. If the part is purchased from the outside supplier, two-thirds of the fixed manufacturing costs can be eliminated. (a) What costs, if any, are relevant to this decision? Which costs are irrelevant? (b) What would the annual impact on the company's net operating income be as a result of buying the part from (10 Marks) the outside supplier? Question 5. Composite Company produces 2,000 parts per year, which are used in the assembly of one of its products. The unit product cost of these parts is: Variable manufacturing cost $64 Fixed manufacturing cost 36 Unit product cost $100 The part can be purchased from an outside supplier at $80 per unit. If the part is purchased from the outside supplier, two-thirds of the fixed manufacturing costs can be eliminated. (a) What costs, if any, are relevant to this decision? Which costs are irrelevant? (b) What would the annual impact on the company's net operating income be as a result of buying the part from (10 Marks) the outside supplier?

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a Relevant costs are costs that will be affected by a managerial decision Irrelevant costs ar... View the full answer