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Find the amount of differential cost increase or decrease

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Question - Sage Company is operating at 90% of capacity and is currently purchasing a part used in its manufacturing operations for $18.00 per unit. The unit cost for the business to make the part is $22.00, including fixed costs, and $12.00, not including fixed costs. If 39,741 units of the part are normally purchased during the year but could be manufactured using unused capacity, find the amount of differential cost increase or decrease from making the part rather than purchasing it?

a. $158,964 cost increase

b. $715,338 cost decrease

c. $238,446 cost increase

d. $238,446 cost decrease

Reference no: EM132591512

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