FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN: 9781259964947
Author: Libby
Publisher: MCG
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Every year Blue Industries manufactures 7,300 units of part 231 for use in its production cycle. The per unit costs of part 231 are as
follows:
Direct materials
Direct labor
Variable manufacturing overhead
Fixed manufacturing overhead
Total
(a)
$3.00
Total relevant cost to make $
11.00
Net relevant cost to buy $
8.00
Cullumber, Inc., has offered to sell 7,300 units f part 231 to Blue for $33 per unit. If Blue accepts Cullumber's offer, its freed-up
facilities could be used to earn $10,700 in contribution margin by manufacturing part 240. In addition, Blue would eliminate 50% of
the fixed overhead applied to part 231.
10.00
$32.00
Calculate total relevant cost to make and net cost to buy.
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Transcribed Image Text:Every year Blue Industries manufactures 7,300 units of part 231 for use in its production cycle. The per unit costs of part 231 are as follows: Direct materials Direct labor Variable manufacturing overhead Fixed manufacturing overhead Total (a) $3.00 Total relevant cost to make $ 11.00 Net relevant cost to buy $ 8.00 Cullumber, Inc., has offered to sell 7,300 units f part 231 to Blue for $33 per unit. If Blue accepts Cullumber's offer, its freed-up facilities could be used to earn $10,700 in contribution margin by manufacturing part 240. In addition, Blue would eliminate 50% of the fixed overhead applied to part 231. 10.00 $32.00 Calculate total relevant cost to make and net cost to buy.
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