How would they determine their cost savings

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Reference no: EM133655040

Question

A manager decides to sign a contract with a new supplier in order to reduce the costs of direct materials. How would they determine their cost savings? Multiply the cost per equivalent unit by the number of units that were completed and transferred out. First, calculate the cost per equivalent unit. Then, multiply it by the units that were completed and transferred out. Finally, take the difference between the original cost and the proposed lower cost. Multiply the direct materials cost per equivalent unit by the percentage of decrease. First, calculate the cost per equivalent unit. Then take the difference between the original cost and the proposed lower cost.

Reference no: EM133655040

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