Milkon Manufacturing produces sensors used in microchip manufacturing processes. Milton has a regular supplier, who provides a key component of the sensors to meet Milton's regular manufacturing demands. However, when Milton has special orders come in that necessitate production beyond a normal range of activity, the supplier does not have the capacity to meet Milton's extra demand for components. In that case, Milton will purchase the components from other suppliers. However, because the preferred supplier gives Milton a volume discount, the per-unit cost of the extra components is greater than the usual price Milton pays for the components.
How would the overall materials cost of the components be properly classified?

Question

Quizplus · Accepted Answer

Total materials costs are evenly variable within a normal range of production, but increase sharply beyond that range. (see Exhibit 6-6 on p. 220).

Milkon Manufacturing Produces Sensors Used in Microchip Manufacturing Processes