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Determine the total incremental cost

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Question - Caver Company currently produces component RX5 for its sole product. The current cost per unit to manufacture the required 54,000 units of RX5 follows.

Direct materials=$5.00

Direct labor=$9.00

Overhead =$10.00

Total costs per unit=$24.00

Direct materials and direct labor are 100% variable. Overhead is 80% fixed. An outside supplier has offered to supply the 54,000 units of RX5 for $19.00 per unit.

Required -

1. Determine the total incremental cost of making 54,000 units of RX5.

2. Determine the total incremental cost of buying 54,000 units of RX5.

3. Should the company make or buy RX5?

Reference no: EM132931025

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