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    Differential cost

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    A business is operating at 70% of capacity and is currently purchasing a part used in its manufacturing operations for $24 per unit. The unit cost for the business to make the part is $36, including fixed costs, and $28, not including fixed costs. If 15,000 units of the part are normally purchased during the year but could be manufactured using unused capacity, what would be the amount of differential cost increase or decrease from making the part rather than purchasing it

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    Solution Preview

    A business is operating at 70% of capacity and is currently purchasing a part used in its manufacturing operations for $24 per unit. The unit cost for the business to make the part is $36, including fixed costs, and $28, not including fixed costs. If 15,000 ...

    Solution Summary

    The solution calculates the differential cost from making the part rather than purchasing it.

    $2.49

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