TM Ltd. currently manufactures Part XMB, which is used in one of its products. At its...

TM Ltd. currently manufactures Part XMB, which is used in one of its products. At its production level of 2764 units, the unit product cost of Part XMB is as follows:

	Direct labour	$7
	Direct materials	5
	Manufacturing overhead (41% is variable)	19

A supplier, Tam Co., has offered to sell TM Ltd. 2764 units of Part XMB for $24 a unit. TM Ltd. has determined that if it purchases the part externally, all costs will be avoidable with the exception of three quarters of the fixed manufacturing overhead.

In determining whether to accept Tam Co.’s offer, what are the relevant costs to TM of manufacturing the parts internally (cost to make)?

Select one:

a. $46297

b. $54700

c. $77938

d. $62446

Expert Solution


Statement showing Relevant Costs to Make
Direct labour(2764*$7)	$ 19,348
Direct material(2764*$5)	$ 13,820
Variable manufacturing labor(2764$1941%)	$ 21,532
Fixed manufacturing labor(2764$1959%*25%)	$ 7,746
Relevant Costs to Make	$ 62,446

So Option D is answer

ekkarill92 answered 2 years ago

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