Reference no: EM132600762

Question - A leather jacket manufacturing company currently producing 100 000 unit of jackets monthly. If the company decided to buy, they have to pay RM130 per unit. The variable cost is all based on the production level while most fixed cost will be there regardless the production. The company need five supervisors to monitor all manufacturing process. However, they only need 2 supervisors to handle the products if they decide not to produce.

Variable Costs

Direct materials ($80 per unit) 8,000,000

Direct labor ($15 per unit) 1,500,000

Variable overhead ($20 per unit) 2,000,000

Total Variable Costs 11,500,000

Fixed Costs

Depreciation of Building 800,000

Depreciation of Equipment 900,000

Supervisory Salaries 75,000

Other 400,000

Total Fixed Costs 2,175,000

Total Cost 13,675,000

Calculate the cost per unit if they decide to buy and decide on should they make or buy.