Johnson manufacturing incurs unit costs of 788 509 variable

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Johnson Manufacturing incurs unit costs of $7.88 ($5.09 variable and $2.79 fixed) in making a sub-assembly part for its finished product. A supplier offers to make 12,600 of the assembly part at $5.54 per unit. If the offer is accepted, Johnson will save all variable costs but no fixed costs. Instructions: Prepare an analysis showing the total cost savings, if any, Johnson will realize by buying the part. Explain why Johnson Company should continue to make or buy the part.

Reference no: EM13602617

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