Nook Company currently produces a key part at a total cost of $280,000. Annual variable costs are $205,000. Of the annual fixed costs, $15,000 relate specifically to this part. The remaining fixed costs are unavoidable.
Another manufacturer has offered to supply the part annually for $240,000. The facilities currently used to manufacture the part could be used to manufacture a new product with an expected contribution margin of $70,000 per year. Alternatively, the facilities could be rented out at $90,000 per year. Given all of these alternatives, what is Nook Company’s lowest net relevant cost for the parts?
| [removed] | A. |
$135,000 |
||||||||||||||||||||||||
| [removed] | B. |
$170,000 |
||||||||||||||||||||||||
| [removed] | C. |
$150,000 |
||||||||||||||||||||||||
| [removed] | D. |
$220,000
Midway Company manufactures a part for its production cycle. The costs per unit for 38,000 units of the part are as follows:
The fixed factory overhead costs are unavoidable. Assume no other use for the facilities. What is the highest price Midway Company should pay for the part from an outside supplier?
|
0 comments