W. T. Ginsburg Engine Company manufactures part ACT31107 used in several of its engine models. Monthly production costs for 1 comma 080 units are as follows: Direct materials $ 41,000 Direct labor 11,500 Variable overhead costs 30,500 Fixed overhead costs 23,000 Total costs $ 106,000 It is estimated that 10 % of the fixed overhead costs assigned to ACT31107 will no longer be incurred if the company purchases ACT31107 from the outside supplier. W. T. Ginsburg Engine Company has the option of purchasing the part from an outside supplier at $ 97.75 per unit. The maximum price that W. T. Ginsburg Engine Company should be willing to pay the outside supplier is A) $82 per ACT31107 part B) $83.43 per ACT31107 partC) $100 per ACT31107 partD) $101.25 per ACT31107 part

Question

Business

Giovani Swanson

15 July, 12:35

W. T. Ginsburg Engine Company manufactures part ACT31107 used in several of its engine models. Monthly production costs for 1 comma 080 units are as follows: Direct materials $ 41,000 Direct labor 11,500 Variable overhead costs 30,500 Fixed overhead costs 23,000 Total costs $ 106,000 It is estimated that 10 % of the fixed overhead costs assigned to ACT31107 will no longer be incurred if the company purchases ACT31107 from the outside supplier. W. T. Ginsburg Engine Company has the option of purchasing the part from an outside supplier at $ 97.75 per unit. The maximum price that W. T. Ginsburg Engine Company should be willing to pay the outside supplier is A) $82 per ACT31107 part B) $83.43 per ACT31107 partC) $100 per ACT31107 partD) $101.25 per ACT31107 part

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Answers (1)

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Leon Lloyd · Answer 1

The minimum price is $78.98

Explanation:

Giving the following information:

Monthly production costs for 1,080 units are as follows:

Direct materials $ 41,000

Direct labor 11,500

Variable overhead costs 30,500

Fixed overhead costs 23,000

Total cost $ 106,000

It is estimated that 10 % of the fixed overhead costs assigned to ACT31107 will no longer be incurred if the company purchases ACT31107 from the outside supplier.

Unitary cost = (41,000 + 11,500 + 30,500) / 1,080 + (23,000*0.10) / 1080 = $76.85 + $2.13 = $78.98