The managerial accountant at the Mill Factory informed the factory manager that the costs to manufacture 20,000 units of a part include the following costs:
The Mill Factory noted that $70,000 of its fixed costs to produce the product is an avoidable cost. The managerial accountant considers whether the company should make the product or buy the product from the Frame Factory because the managerial accountant at the Frame Factory offered to produce and sell 20,000 units of the same product to the manager at the Mill Factory at $50 per unit. Should the managerial accountant make-or-buy the product at $50 per unit? What is the total cost to make the product? What is the total cost to buy the product? Explain your answer.

Question

The managerial accountant at the Mill Factory informed the factory manager that the costs to manufacture 20,000 units of a part include the following costs:
  The Mill Factory noted that $70,000 of its fixed costs to produce the product is an avoidable cost. The managerial accountant considers whether the company should make the product or buy the product from the Frame Factory because the managerial accountant at the Frame Factory offered to produce and sell 20,000 units of the same product to the manager at the Mill Factory at $50 per unit. Should the managerial accountant make-or-buy the product at $50 per unit? What is the total cost to make the product? What is the total cost to buy the product? Explain your answer.

Quizplus · Accepted Answer

The Answer of The managerial accountant at the Mill Factory informed the factory manager that the costs to manufacture 20,000 units of a part include the following costs:
  The Mill Factory noted that $70,000 of its fixed costs to produce the product is an avoidable cost. The managerial accountant considers whether the company should make the product or buy the product from the Frame Factory because the managerial accountant at the Frame Factory offered to produce and sell 20,000 units of the same product to the manager at the Mill Factory at $50 per unit. Should the managerial accountant make-or-buy the product at $50 per unit? What is the total cost to make the product? What is the total cost to buy the product? Explain your answer.

The Managerial Accountant at the Mill Factory Informed the Factory