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Discuss what are the relevant costs for the make alternative

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The CJP Company produces 10,000 units of item S10 annually at a total cost of $190,000.  

Direct materials

$20,000

Direct labor

$55,000

Variable overhead

$45,000

Fixed overhead

$70,000

   Total

$190,000

The XYZ Company has offered to supply 10,000 units of S10 per year for $18 per unit. If CJP accepts the offer, $4 per unit of the fixed overhead would be saved. In addition, some of CJP's facilities could be rented to a third party for $15,000 per year. What are the relevant costs for the "make" alternative?

Reference no: EM131818739

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