Question
In: Accounting
Car Parts Company manufactures a part for use in its production of automobiles. The costs per...
Car Parts Company manufactures a part for use in its production of
automobiles. The costs per unit when 10,000 items are produced are:
Direct materials $6
Direct manufacturing labour 30
Variable manufacturing overhead 12
Fixed manufacturing overhead 16
Total $64
Auto Company has offered to sell to Car Parts Company 10,000 units of the part
for $60. The plant facilities could be used to manufacture another part at a
savings of $90,000 if Car Parts accepts the offer. In addition, $10 per unit of fixed
manufacturing overhead on the original part would be eliminated.
a. What is the relevant per unit cost for the original part?
b. Which alternative is best for Car Parts Company? By how much?
Solutions
ekkarill92 answered 2 years agoRelated Solutions
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Direct labor 12
Variable factory overhead 20
Unavoidable fixed factory overhead 18
Total cost $65
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