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Describe avoidable costs

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Reference no: EM132534174

Quiet Truck manufactures part WB23 used in several of its truck models. 10,000 units are produced each year with production costs as follows:

Direct materials $ 45,000

Direct labor 15,000

Variable support costs 35,000

Fixed support costs 25,000

Total costs $120,000

  • Quiet Truck has the option of purchasing part WB23 from an outside supplier at $11.20 per unit. If part WB23 is outsourced, 40% of the fixed costs cannot be immediately converted to other uses.

Question a. Describe avoidable costs. What amount of the part WB23's production costs is avoidable?

Question b. Should Quiet Truck outsource part WB23? Why or why not?

Question c. What other items should Quiett Truck consider before outsourcing any of the parts it currently manufactures?

Reference no: EM132534174

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