Answer:
1a. $6.60
1b. $6.76
1c. Silven Industries should make the tubes for this cost $0.16 less than purchasing
2. $1.24
Explanation:
1a. Calculation total variable cost of producing one box of chap-off (24)
<em>Note : No additional fixed manufacturing overhead costs will be incurred to produce the product</em>
Direct Materials 3.90
Direct labor 1.90
Manufacturing overhead (1.30 -0.50) 0.80
Total 6.60
1b Calculation of the total variable cost of producing one box of chap-off
Purchase of Tubes 1.40
Direct Materials (3.90× 75%) 2.93
Direct labor ( 1.90× 90%) 1.71
Manufacturing overhead (1.30 -0.50) × 90% 0.72
Total 6.76
1c Consider incremental cost per unit
Total incremental cost = 6.76 - 6.60
= $0.16
Therefore Silven Industries make the tubes for this cost $0.16 less than purchasing
2.
Maximum purchase price acceptable to Silven Industries
Purchase of Tubes 1.24
Direct Materials (3.90× 75%) 2.93
Direct labor ( 1.90× 90%) 1.71
Manufacturing overhead (1.30 -0.50) × 90% 0.72
Total 6.60
The Overall total cost must not exceed the $6.60 of making Internally -
Thus,Working from Back - Wards the maximum price acceptable to Silven Industries is $1.24