Supler Corporation produces a part used in the manufacture of one of its products. The unit cost
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Supler Corporation produces a part used in the manufacture of one of its products. The unit cost of the product is $21, calculated as follows:
Direct materials | ps | 8 | |
Direct labour | 7 | ||
Variable manufacturing overhead | 2 | ||
Fixed manufacturing costs | 4 | ||
unit cost of product | ps | 21 | |
An outside vendor has offered to provide the annual requirement of 4,400 parts for only $10 each. The company estimates that 50% of the aforementioned fixed manufacturing overhead costs could be eliminated if parts are purchased from an outside vendor. Assume that direct labor is an avoidable cost in this decision. Based on these data, the economic advantage (disadvantage) of purchasing the parts from the external supplier would be ?
Related Book For
Cost Management Measuring Monitoring And Motivating Performance
ISBN: 9781118168875
2nd Canadian Edition
Authors: Leslie G. Eldenburg, Susan Wolcott, Liang Hsuan Chen, Gail Cook
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