Northwest Florida State College Operations And Supply Chain Management Assignment Help - incremental costs

Question - Haver Company currently produces component RX5 for its sole product. The equipment that is used
to produce RX5 must be replaced, and management must decide whether to replace the equipment
or buy RX5 from an outside supplier. The current cost per unit to manufacture the required 59,000
units of RX5 follows.
Direct materials $ 5.00
Direct labor 8.00
Overhead 9.00

Total costs per unit $ 22.00






Direct materials and direct labor are 100% variable. Overhead is 60% fixed, and the current fixed
overhead includes $0.50 per unit depreciation on the old equipment. If management buys the new
equipment, it will incur depreciation of $1.62 per unit. An outside supplier has offered to supply the
59,000 units of RX5 for $ ...Read More 18.00 per unit.
Required:
1. Calculate the incremental costs of making and buying component RX5.
Incremental cost to make $
Incremental cost to buy $

2. Whether the company should make or buy the RX5.

Buy
Make ...Read Less

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