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1 December, 04:19

Kando Company incurs a $9 per unit cost for Product A, which it currently manufactures and sells for $13.50 per unit. Instead of manufacturing and selling this product, the company can purchase Product B for $5 per unit and sell it for $12 per unit. If it does so, unit sales would remain unchanged and $5 of the $9 per unit costs assigned to Product A would be eliminated. 1. Prepare Incremental cost analysis. Should the company continue to manufacture Product A or purchase Product B for resale? (Round your answers to 2 decimal places.)

In the format below:

Manufacture A Purchase Product B

sales

costs

aviodable cost

unavoidable costs

cost to purchase

totals costs

sales

The company should ...

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Answers (1)
  1. 1 December, 06:40
    0
    Manufacture Product A Purchase Product B

    sales 0 0

    costs 0 0

    aviodable cost 0 0

    unavoidable costs $9.00 $4.00

    cost to purchase 0 $5.00

    totals costs ($9.00) ($9.00)

    sales $13.50 $12.00

    Advantage $4.50 $3.00

    The company should Manufacture Product A

    Explanation:

    Calculations based on Incremental Costs Only

    Manufacture Product A Purchase Product B

    sales 0 0

    costs 0 0

    aviodable cost 0 0

    unavoidable costs $9.00 $4.00

    cost to purchase 0 $5.00

    totals costs ($9.00) ($9.00)

    sales $13.50 $12.00

    Advantage $4.50 $3.00

    The company should Manufacture Product A

    Since Product A results in higher Financial Advantage of $4.50
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