The cost to produce Part A was $5 per unit in 2011.During 2012, it has increased to $8 per unit.In 2012, Supplier Company has offered to supply Part A for $6 per unit.For the make-or-buy decision,
A)incremental revenues are $1 per unit.
B)incremental costs are $3 per unit.
C)net relevant costs are $3 per unit.
D)differential costs are $2 per unit.

Question

Quizplus · Accepted Answer

The differential cost is the difference in cost between making the part ($8) and buying it ($6), which is $2 per unit.

The Cost to Produce Part a Was $5 Per Unit