Calculate total relevant cost to make and net cost to buy

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Reference no: EM133004726

Every year Martinez Industries manufactures 5,300 units of part 231 for use in its production cycle. The per unit costs of part 231 are as follows:

Direct materials $ 5.00
Direct labor 11.00
Variable manufacturing overhead 6.00
Fixed manufacturing overhead 10.00
Total $32.00

Sandhill, Inc., has offered to sell 5,300 units of part 231 to Martinez for $32 per unit. If Martinez accepts Sandhill's offer, its freed-up facilities could be used to earn $10,600 in contribution margin by manufacturing part 240. In addition, Martinez would eliminate 40% of the fixed overhead applied to part 231.

Problem 1: Calculate total relevant cost to make and net cost to buy.

Reference no: EM133004726

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