Alpha Co.can produce a unit of Beta for the following costs:
Direct material........................................$ 8
Direct lab or:........................................24
Overhead ............................................40
Total costs per unit..........................$ 72 An outside supplier offers to provide Alpha with all the Beta units it needs at $60 per unit.If Alpha buys from the supplier,Alpha will still incur 40% of its overhead.Alpha should:

Question

Alpha Co.can produce a unit of Beta for the following costs:
Direct material........................................$ 8 
Direct lab or:........................................24
Overhead ............................................40
Total costs per unit..........................$ 72 An outside supplier offers to provide Alpha with all the Beta units it needs at $60 per unit.If Alpha buys from the supplier,Alpha will still incur 40% of its overhead.Alpha should:

Quizplus · Accepted Answer

The relevant cost to make Beta is $56, which includes direct material ($8), direct labor ($24), and 40% of the overhead ($16). Since $56 is less than the $60 per unit offered by the supplier, Alpha should make Beta.

Alpha CoCan Produce a Unit of Beta for the Following Costs