Asked by
Gabby Knapp
on Dec 16, 2024
Verified
Golden, Inc. has been manufacturing 5,000 units of Part 10541 which is used in one of its products. At this level of production, the unit product cost of Part 10541 is as follows: Direct materials $2 Direct labour 8 Variable manufacturing overhead 4 Fixed manufacturing overhead 6 Unit product cost $220\begin{array} { | l | r | } \hline \text { Direct materials } & \$ 2 \\\hline \text { Direct labour } & 8 \\\hline \text { Variable manufacturing overhead } & 4 \\\hline \text { Fixed manufacturing overhead } & 6 \\\hline \text { Unit product cost } & \$ 220 \\\hline\end{array} Direct materials Direct labour Variable manufacturing overhead Fixed manufacturing overhead Unit product cost $2846$220 Brown Company has offered to sell Golden 5,000 units of Part 10541 for $19 a unit. Golden has determined that two thirds of the fixed manufacturing overhead will continue even if Part 10541 is purchased from Brown. Assume that direct labour is an avoidable cost in this decision. To determine whether to accept Brown's offer, the relevant costs to Golden of manufacturing the parts internally are:
A) $80,000.
B) $95,000.
C) $70,000.
D) $90,000.
Direct Labour
Workers who are directly involved in the production of goods or services.
Variable Manufacturing Overhead
Costs that vary directly with the level of production output and can include expenses such as indirect materials and utilities.
- Examine the determination of whether to produce internally or outsource, guided by relevant cost analysis.
Verified Answer
AJ
Learning Objectives
- Examine the determination of whether to produce internally or outsource, guided by relevant cost analysis.