Asked by
Tolety Srinivas
on Oct 14, 2024
Verified
Epsilon Co.can produce a unit of product for the following costs: Direct material $8Direct labor 24Overhead 40Total product costs per unit $72\begin{array}{l}\begin{array} { l l r } \text {Direct material }& \$8\\\text {Direct labor }&24\\\text {Overhead }&40\\\text {Total product costs per unit }&\$72\\\end{array}\end{array}Direct material Direct labor Overhead Total product costs per unit $82440$72 An outside supplier offers to provide Epsilon with all the units it needs at $60 per unit.If Epsilon buys from the supplier,the company will still incur 40% of its overhead.Epsilon should choose to:
A) Buy since the relevant cost to make it is $72.
B) Make since the relevant cost to make it is $56.
C) Buy since the relevant cost to make it is $48.
D) Make since the relevant cost to make it is $48.
E) Buy since the relevant cost to make it is $56.
Direct Material
Raw input directly utilized in the creation of a product, essential for the product’s production process.
Direct Labor
The wages and other compensation paid to employees directly involved in producing goods or providing services.
Overhead
General business expenses not directly attributed to creating a product or service.
- Determine the differences between fixed costs and variable costs.
- Gain insight into the fundamental aspects of incremental cost and revenue, and how they influence managerial decisions.
Verified Answer
PH
Learning Objectives
- Determine the differences between fixed costs and variable costs.
- Gain insight into the fundamental aspects of incremental cost and revenue, and how they influence managerial decisions.