Eichholtz Company uses 10,000 units of a part in its production process. The costs to make a part are: direct material, $12; direct labor, $25; variable overhead, $13; and applied fixed overhead, $30 . Eichholtz has received a quote of $55 from a potential supplier for this part. If Eichholtz buys the part, 70 percent of the applied fixed overhead would continue. Eichholtz Company would be better
off by
a. $50,000 to manufacture the part.
b. $150,000 to buy the part.
c. $40,000 to buy the part.
d. $160,000 to manufacture the part.
C
Cost to buy: $55/unit * 10,000 units = $550,000
Cost to manufacture: $(12+25+13+9)= $59/unit
Incremental difference in favor of buying: $4/unit * 10,000 units = $40,000
You might also like to view...
The two kinds of supplies with respect to industrial goods classification are maintenance and repair items, and ________
A) installations B) operating supplies C) processed materials D) component materials E) equipment
What are the main career challenges for women? What can organizations do to make better use of women's talents?
What will be an ideal response?
Which of the following is in place when a manufacturer makes use of more than one type of channel?
A) multichannel distribution system B) intermediation C) third-party logistics D) supply chain management E) vertical marketing system
As the salesperson hands the retail store buyer the sunglasses, he asks, "You like the fit, the color, and how these glasses darken, right?" What the salesperson said is an example of the ________ close.
A. assumptive B. minor-points C. assertiveness D. alternative-choice E. summary-of-benefits