Question

Sage Company is operating at 90% of capacity and is currently purchasing a part used in its manufacturing operations for $14.00 per unit. The unit cost for the business to make the part is $20.00, including fixed costs, and $11.00, excluding fixed costs. If 31,994 units of the part are normally purchased during the year but could be manufactured using unused capacity, what would be the amount of differential cost increase or decrease from making the part rather than purchasing it

Answer 1

The answer is "$95982"

Step-by-step explanation:

Cost of purchase:
`\$ 14`

Make Cost Important:
`-\$11`

(In this case not to be avoided fixed costs)

Cost reduction if completed:
`a = \$ 3`

No single units:
`b = \$ 31,994`

Reduction of total costs:
`a * b = \$ 95,982`