Answer:
The Company will use the 64 unit cost for the make scenario
and use the 54 for the buy plus the fixed cost (6x 2000)
In the short term, when the fixed cost are unavoidable, the operating profit will increase to 6,000
in the long-term, the operating profit will increase to 18,000
Explanation:
Direct Materials 27
Direct Labor 16
Variable Overhead 14
Fixed Overhead 6
Total unit cost 63
Total Variable Cost 57
Offered Unit cost
108,000/2,000 = 54
Unit Cost $63.00 $54.00 $9.00
Total Cost $126,000.00 $108,000.00 $18,000.00
Unavoidable Fixed Cost $12,000.00 -$12,000.00
Total Cost $126,000.00 $120,000.00 $6,000.00
