Answer:
It will be a financing advantage for 18,800 It should accept the offer
<em><u>Missing Information</u></em>
Kleffman Corporation is presently making part X31 that is used in one of its products. A total of 2,000 units of this part are produced and used every year. The company's Accounting Department reports the following costs of producing the part at this level of activity:
DM $6.90
DL $4.90
V MO $8.00
Supervisor $2.20
Depreciation $1.40
general $2.80
total cost $ 26.20
Explanation:
We will face unavoidable cost for:
$2.80 x 2,000 units = $5,600
The depreciation should be considered sunk cost as financially it do not repreent any cash flow for the company.
Make cost: 2,000 units x $26.20 = $ 52,400
opportunity cost:
additional segment margin <u> $ 18,800 </u>
Total cost $ 71,200
Purchase cost: $ 23.40 x 2,000 = $ 46,800
unavoidable cost: <u> $ 5,600 </u>
Total cost $ 52,400
Differential: 71,200 -52,400 = 18,800
