Sparrow Co. is currently operating at 80% of capacity and is currently purchasing a part used in
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Sparrow Co. is currently operating at 80% of capacity and is currently purchasing a part used in its manufacturing operations for $8.00 a unit. The unit cost for Sparrow Co. to make the part is $9.00, which includes $.60 of fixed costs. If 4,000 units of the part are normally purchased each year but could be manufactured using unused capacity, what would be the amount of differential cost increase or decrease for making the part rather than purchasing it?
a. $12,000 cost decrease
b. $20,000 cost decrease
c. $1,600 cost increase
d. $4,000 cost increase
Related Book For
Managerial Accounting A Focus on Ethical Decision Making
ISBN: 978-0324663853
5th edition
Authors: Steve Jackson, Roby Sawyers, Greg Jenkins
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