Question

Every year Concord Industries manufactures 10,000 units of part 231 for use in its production cycle. The per unit costs of part 231 are as follows: Direct materials $ 4 Direct labor 9 Variable manufacturing overhead 7 Fixed manufacturing overhead 10 Total $30 Flintrock, Inc., has offered to sell 10,000 units of part 231 to Concord for $32 per unit. If Concord accepts Flintrock’s offer, its freed-up facilities could be used to earn $11,700 in contribution margin by manufacturing part 240. In addition, Concord would eliminate 40% of the fixed overhead applied to part 231. (a) Calculate total relevant cost to make and net cost to buy.

Total relevant cost to make $Enter total relevant cost to make in dollars

Net relevant cost to buy $Enter net relevant cost to buy in dollars

(b) Should Concord accept Flintrock’s offer?

Answer 1