Answer:
a) Unit product cost relevant for decision = $41.60
b) Net dollar advantage = $49,200
c) Maximum per unit cost willing to pay = $46.60
Explanation:
As per the data given in the question,
a)
Particulars Amount
Direct materials $13.20
Direct labor $20.20
Variable manufacturing overhead $3.20
Fixed manufacturing cost $5.00 ($10.20-$5.20)
Unit product cost $41.60 ($46.80-$5.20)
Unit product cost relevant for decision = $41.60
b)
Relevant unit product cost = $41.60
Supplier offered selling price = $42.50
Additional contribution margin per year = $60,000
Production in year = 12,000 units
Net dollar advantage = ($41.60-$42.50) × 12,000 + $60,000
= $49,200
c)
Maximum per unit cost willing to pay = $42.50 + $49,200 ÷ 12,000
= $46.60
