Exercise 23-2 Make or buy LO P1 Gelb Company currently manufactures 55,500 units per year of a key component for its manufacturing process. Variable costs are $5.15 per unit, fixed costs related to making this component are $81,000 per year, and allocated fixed costs are $74,500 per year. The allocated fixed costs are unavoidable whether the company makes or buys this component. The company is considering buying this component from a supplier for $3.70 per unit. Calculate the total incremental cost of making 55,500 units and buying 55,500 units. Should it continue to manufacture the component, or should it buy this component from the outside supplier? Complete this question by entering your answers in the tabs below. Costs to Make Costs to Buy Outside Supplier Calculate the total incremental cost of making 55,500 units. (Round "variable cost per unit" answers to 2 decimal places.) Incremental Costs to Make Variable cost per unit Fixed manufacturing costs Total incremental cost to make Relevant Amount per Unit Relevant Fixed Costs Total Relevant Costs Costs to Make Costs to Buy Outside Supplier Calculate the total incremental cost of buying 55,500 units. (Round "purchase price per unit" answers to 2 decimal places.) Incremental Costs to Buy Purchase price per unit Total incremental cost to buy Relevant Amount per Unit Relevant Fixed Costs Total Relevant Costs
Exercise 23-2 Make or buy LO P1 Gelb Company currently manufactures 55,500 units per year of a key component for its manufacturing process. Variable costs are $5.15 per unit, fixed costs related to making this component are $81,000 per year, and allocated fixed costs are $74,500 per year. The allocated fixed costs are unavoidable whether the company makes or buys this component. The company is considering buying this component from a supplier for $3.70 per unit. Calculate the total incremental cost of making 55,500 units and buying 55,500 units. Should it continue to manufacture the component, or should it buy this component from the outside supplier? Complete this question by entering your answers in the tabs below. Costs to Make Costs to Buy Outside Supplier Calculate the total incremental cost of making 55,500 units. (Round "variable cost per unit" answers to 2 decimal places.) Incremental Costs to Make Variable cost per unit Fixed manufacturing costs Total incremental cost to make Relevant Amount per Unit Relevant Fixed Costs Total Relevant Costs Costs to Make Costs to Buy Outside Supplier Calculate the total incremental cost of buying 55,500 units. (Round "purchase price per unit" answers to 2 decimal places.) Incremental Costs to Buy Purchase price per unit Total incremental cost to buy Relevant Amount per Unit Relevant Fixed Costs Total Relevant Costs
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Question
Transcribed Image Text:Exercise 23-2 Make or buy LO P1
Gelb Company currently manufactures 55,500 units per year of a key component for its manufacturing process. Variable costs are
$5.15 per unit, fixed costs related to making this component are $81,000 per year, and allocated fixed costs are $74,500 per year. The
allocated fixed costs are unavoidable whether the company makes or buys this component. The company is considering buying this
component from a supplier for $3.70 per unit.
Calculate the total incremental cost of making 55,500 units and buying 55,500 units. Should it continue to manufacture the
component, or should it buy this component from the outside supplier?
Complete this question by entering your answers in the tabs below.
Costs to Make Costs to Buy
Outside
Supplier
Calculate the total incremental cost of making 55,500 units. (Round "variable cost per unit" answers to 2 decimal places.)
Incremental Costs to Make
Variable cost per unit
Fixed manufacturing costs
Total incremental cost to make
Relevant
Amount per
Unit
Relevant
Fixed Costs
Total Relevant
Costs
<Costs to Make
Costs to Buy >
Costs to Make Costs to Buy
Outside
Supplier
Calculate the total incremental cost of buying 55,500 units. (Round "purchase price per unit" answers to 2 decimal places.)
Incremental Costs to Buy
Purchase price per unit
Total incremental cost to buy
Relevant
Amount per
Unit
Relevant
Fixed Costs
Total Relevant
Costs
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