Pergola Industries currently produces 1,000 units of a part needed for its product, incurring the following costs: If Pergola Industries purchases the component externally, $4,000 of the fixed costs can be avoided. Below what external price per unit for the 1,000 units would Galley choose to outsource (buy) instead of insource (make)?

Question

Pergola Industries currently produces 1,000 units of a part needed for its product, incurring the following costs:  If Pergola Industries purchases the component externally, $4,000 of the fixed costs can be avoided. Below what external price per unit for the 1,000 units would Galley choose to outsource (buy) instead of insource (make)?

Quizplus · Accepted Answer

(Direct Materials + Direct Labor + Variable Overhead + Fixed Costs Avoided = External Price to Buy instead of Make) = $25,000 + $8,000 + $16,000 + $4,000 = $53,000 ÷ 1,000 = $53

Pergola Industries Currently Produces 1,000 Units of a Part Needed