chapter_12 - Exercise123(30minutes 1 PerUnit Differential...

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Exercise 12-3  (30 minutes) 1. Per Unit  Differential  Costs 15,000 units Make Buy Make Buy Cost of purchasing. ...................... $20 $300,000 Direct materials. ........................... $ 6 $ 90,000 Direct labor. ................................. 8 120,000 Variable manufacturing overhead 1 15,000 Fixed manufacturing overhead,  traceable 1 .................................. 2 30,000 Fixed manufacturing overhead,  common. ...................................       0          0                          0                          0    Total costs. ................................... $17 $20 $255,000 $300,000 Difference in favor of continuing  to make the parts. ..................... $3 $45,000 1 Only the supervisory salaries can be avoided if the parts are  purchased. The remaining book value of the special equipment is a  sunk cost; hence, the $3 per unit depreciation expense is not relevant  to this decision. Based on these data, the company should reject the  offer and should continue to produce the parts internally. 2. Make Buy Cost of purchasing (part 1). ........................... $300,000 Cost of making (part 1). ................................. $255,000
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chapter_12 - Exercise123(30minutes 1 PerUnit Differential...

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