An outside manufacturer has offered to produce 83,000 Daks and ship them directly to Andretti's customers. If Andretti Company accepts this offer, the facilities that it uses to produce Daks would be idle; however, fixed manufacturing overhead costs would be reduced by 30%. Because the outside manufacturer would pay for all shipping costs, the variable selling expenses would be only two-thirds of their present amount. What is Andretti's avoidable cost per unit that it should compare to the price quoted by the outside manufacturer? (Do not round intermediate calculations. Round your answers to 2 decimal places.)

Question

Business

Cristofer Norton

18 January, 03:45

An outside manufacturer has offered to produce 83,000 Daks and ship them directly to Andretti's customers. If Andretti Company accepts this offer, the facilities that it uses to produce Daks would be idle; however, fixed manufacturing overhead costs would be reduced by 30%. Because the outside manufacturer would pay for all shipping costs, the variable selling expenses would be only two-thirds of their present amount. What is Andretti's avoidable cost per unit that it should compare to the price quoted by the outside manufacturer? (Do not round intermediate calculations. Round your answers to 2 decimal places.)

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Answers (1)

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Jesus Sandoval · Answer 1

Andretti's avoidable cost per unit that it should compare to the price quoted by the outside manufacturer is 24.37

Explanation:

total cost per unit avoided = Variable manfuacturing costs + fixed manufacturing overhead cost + variable selling expense

= 21 + 6*30% + 4.7*1/3

= 21 + 1.8 + 1.57

= 24.37

Therefore, Andretti's avoidable cost per unit that it should compare to the price quoted by the outside manufacturer is 24.37