Question

Andi Company manufactures a part for its production cycle. The costs per unit for 10,000 units of the part are as follows: Per Unit Direct materials $20.00 Direct labor 15.00 Variable factory overhead 5.00 Fixed factory overhead 10.00 Total costs $50.00 The fixed factory overhead costs are unavoidable. Step Company has offered to sell 10,000 units of the same part to Andi Company for $45 per unit. Assuming no other use for the facilities, Andi Company should ________.

Answer 1

Andi Company should Make the part to save $50,000

Step-by-step explanation:

Some of Audi’s production cycle are manufactured in partly by the company. 10,000 units costs per unit for some part are as follows: the Direct labor 15.00, Variable factory overhead, 5.00 Per Unit Direct materials $20.00, Fixed factory overhead 10.00 and the Total costs is $50.00 the company can’t do without incurring some cost like The fixed factory overhead costs. Since the Step Company has presented an offer to sell 10,000 units of the same part to Andi Company for a price of $45 per unit.

Then Andi Company should Make the part to save $50,000

The attched image below is a more understandable presentation and solution to the question above.

Answer 2

Andi Company manufactures a part for its production cycle. The costs per unit for 10,000 units of the part are as follows: Per Unit Direct materials $20.00 Direct labor 15.00 Variable factory overhead 5.00 Fixed factory overhead 10.00 Total costs $50.00 The fixed factory overhead costs are unavoidable. Step Company has offered to sell 10,000 units of the same part to Andi Company for $45 per unit. Assuming no other use for the facilities, Andi Company should make the part to sale at $50,000.