Office Tech Inc. is currently purchasing a standard part for $30 per unit which is used for manufacturing different types of devices. The company is operating at 80% capacity and can make the part at a cost of $40 per unit which include an allocated fixed cost per unit of $8. If the company decide to use the idle manufacturing space to produce 30,000 units of parts, what would be the amount of increase or decrease in differential costs from making the part rather than purchasing? Group of answer choices Cost would be increased by $60,000 Cost would be increased by $300,000 Cost would be decreased by $60,000 Cost would be decreased by $300,000
Office Tech Inc. is currently purchasing a standard part for $30 per unit which is used for manufacturing different types of devices. The company is operating at 80% capacity and can make the part at a cost of $40 per unit which include an allocated fixed cost per unit of $8. If the company decide to use the idle manufacturing space to produce 30,000 units of parts, what would be the amount of increase or decrease in differential costs from making the part rather than purchasing? Group of answer choices Cost would be increased by $60,000 Cost would be increased by $300,000 Cost would be decreased by $60,000 Cost would be decreased by $300,000
Managerial Accounting
15th Edition
ISBN:9781337912020
Author:Carl Warren, Ph.d. Cma William B. Tayler
Publisher:Carl Warren, Ph.d. Cma William B. Tayler
Chapter10: Evaluating Decentralized Operations
Section: Chapter Questions
Problem 17E: Materials used by the Instrument Division of Ziegler Inc. are currently purchased from outside...
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Question
Office Tech Inc. is currently purchasing a standard part for $30 per unit which is used for manufacturing different types of devices. The company is operating at 80% capacity and can make the part at a cost of $40 per unit which include an allocated fixed cost per unit of $8.
If the company decide to use the idle manufacturing space to produce 30,000 units of parts, what would be the amount of increase or decrease in differential costs from making the part rather than purchasing?
Group of answer choices
Cost would be increased by $60,000
Cost would be increased by $300,000
Cost would be decreased by $60,000
Cost would be decreased by $300,000
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