Gent Designs requires three units of part A for every unit of A1 that it produces. Currently, part A is made by Gent, with these per-unit costs in a month when 3,900 units were produced: Direct materials $4.00 Direct labor 1.50 Manufacturing overhead 1.20 Total $6.70 Variable manufacturing overhead is applied at $1.00 per unit. The other $0.20 of overhead consists of allocated fixed costs. Gent will need 5,800 units of part A for the next year's production. Cory Corporation has offered to supply 5,800 units of part A at a price of $6.90 per unit. If Gent accepts the offer, all of the variable costs and $780 of the fixed costs will be avoided. A. Calculate the differential cost? Cost to buy Cost to make Differential cost B. Should Gent Designs accept the offer from Cory Corporation? Gent Designs

Gent Designs requires three units of part A for every unit of A1 that it produces. Currently, part A is made by Gent, with these per-unit costs in a month when 3,900 units were produced: Direct materials $4.00 Direct labor 1.50 Manufacturing overhead 1.20 Total $6.70 Variable manufacturing overhead is applied at $1.00 per unit. The other $0.20 of overhead consists of allocated fixed costs. Gent will need 5,800 units of part A for the next year's production. Cory Corporation has offered to supply 5,800 units of part A at a price of $6.90 per unit. If Gent accepts the offer, all of the variable costs and $780 of the fixed costs will be avoided. A. Calculate the differential cost? Cost to buy Cost to make Differential cost B. Should Gent Designs accept the offer from Cory Corporation? Gent Designs

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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