Direct materials. . $ 5.00 Direct labor... 8.00 Overhead ... 9.00 Total cost per unit. $22.00 Direct materials and direct labor are 100% variable. Overhead is 80% fixed. An outside supplier has offered to supply the 50,000 units of RX5 for $18.00 per unit. Required 1. Determine the total incremental cost of making 50,000 units of RX5. 2. Determine the total incremental cost of buying 50,000 units of RX5. 3. Should the company make or buy RX5?

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
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Haver Company currently produces component RX5 for one of its products. The current cost per unit to manufacture the required 50,000 units of RX5 follows.

Direct materials. .
$ 5.00
Direct labor...
8.00
Overhead ...
9.00
Total cost per unit.
$22.00
Direct materials and direct labor are 100% variable. Overhead is 80% fixed. An outside supplier has
offered to supply the 50,000 units of RX5 for $18.00 per unit.
Required
1. Determine the total incremental cost of making 50,000 units of RX5.
2. Determine the total incremental cost of buying 50,000 units of RX5.
3. Should the company make or buy RX5?
Transcribed Image Text:Direct materials. . $ 5.00 Direct labor... 8.00 Overhead ... 9.00 Total cost per unit. $22.00 Direct materials and direct labor are 100% variable. Overhead is 80% fixed. An outside supplier has offered to supply the 50,000 units of RX5 for $18.00 per unit. Required 1. Determine the total incremental cost of making 50,000 units of RX5. 2. Determine the total incremental cost of buying 50,000 units of RX5. 3. Should the company make or buy RX5?
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