Solution-Calculate total relevant cost to make and net cost

Calculate total relevant cost to make and net cost to buy

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Reference no: EM133177781

Question - Every year Ayayai Industries manufactures 5,000 units of part 231 for use in its production cycle. The per unit costs of part 231 are as follows:

Direct materials $3.00

Direct labor 9.00

Variable manufacturing overhead 5.00

Fixed manufacturing overhead 10.00

Total $27.00

Crane, Inc., has offered to sell 5,000 units of part 231 to Ayayai for $32 per unit. If Ayayai accepts Crane's offer, its freed-up facilities could be used to earn $10,000 in contribution margin by manufacturing part 240. In addition, Ayayai would eliminate 40% of the fixed overhead applied to part 231.

Required -

(a) Calculate total relevant cost to make and net cost to buy.

(b) Should Ayayai accept Crane's offer?

Reference no: EM133177781

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Calculate total relevant cost to make and net cost to buy

Reference no: EM133177781

Reference no: EM133177781

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