Question

Manson Industries incurs unit costs of $6 ($4 variable and $2 fixed) in making an assembly part for its finished product. A supplier offers to make 10,000 of the assembly part at $5 per unit. If the offer is accepted, Manson will save all variable costs but no fixed costs. Prepare an analysis showing the total cost saving, if any, Manson will realize by buying the part. (Enter negative amounts using either a negative sign preceding the number e.g. -45 or parentheses e.g. (45).)

Answer 1

Answer:

It will expend 10,000 more

total cost saving: (10,000)

Explanation:

10,000 x 5 = 50,000

+ unavoidable Fixed cost 10,000 x 2 = 20,000

Total cost 70,000

Current escenario

10,000 x 6 = 60,000 cost

60,000 - 70,000 = (10,000) saving