Problem Set 1
Purchase Price = $32 Per Unit
Units Produced = 4,000 Per Year
Fixed Costs = $20,000
Variable Over Head = $ 12 Per Unit
Labor Costs = $6 Per Unit
How much would it cost to buy this product from another company?
$32 X 4,000 = $128,000
Purchase Price = $55
Units Produced = 15,000
Fixed Costs = $75,000
Variable Over Head = $45
Labor Costs = $15,000
How much would it cost to buy this product from another company?
$55 x 15,000 = 825,000
Purchase Price = 75
Units Produced = 450
Fixed Costs = $35,000
Variable Over Head = $45 per unit
Labor Costs = $15 per unit
How much would it cost to buy this product from another company?
$75 x 450 = $33,750
Purchase Price = $475 Per Unit
Units Produced = 290 Per Year
Fixed Costs = $50,000
Variable Over Head = $175 Per Unit
Labor Costs = $37 Per Unit
How much would it cost to buy this product from another company?
$475 X 290 = $137,750
Purchase Price = $32 Per Unit
Units Produced = 4,000 Per Year
Fixed Costs = $20,000
Variable Over Head = $12 Per Unit
Labor Costs = $6 Per Unit
What is the total cost of making this product?
(($12 + $6) X 4,000) + $20,000 = $92,000
Purchase Price = $55
Units Produced = 15,000
Fixed Costs = $75,000
Variable Over Head = $45
Labor Costs per unit = $7
What is the total cost of making this product?
$75,000 + (($45+$7) x 15,000) = 855,000
Purchase Price = 75
Units Produced = 450
Fixed Costs = $35,000
Variable Over Head = $45 per unit
Labor Costs = $15 per unit
What is the total cost of making this product?
(($45+$15) X 450) + $35,000 = $62,000
Purchase Price = $475 Per Unit
Units Produced = 290 Per Year
Fixed Costs = $50,000
Variable Over Head = $175 Per Unit
Labor Costs = $37 Per Unit
What is the total cost of making this product?
(($175 + $37) X 290) + $50,000 = $111,480
Purchase Price = $32 Per Unit
Units Produced = 4,000 Per Year
Fixed Costs = $20,000
Variable Over Head = $12 Per Unit
Labor Costs = $6 Per Unit
How many units need to be produced in order to break even? (Round up if needed)
$20,000 / $32 - ($12 + $6) = 1,429 units
Purchase Price = $55
Units Produced = 15,000
Fixed Costs = $75,000
Variable Over Head = $45
Labor Costs = $15,000
How many units need to be produced in order to break even?
$75,000 / $55 - ($7 + $45) = 25,000
Purchase Price = $75
Units Produced = 450
Fixed Costs = $35,000
Variable Over Head = $45 per unit
Labor Costs = $15 per unit
How many units need to be produced in order to break even? (Round up if needed)
$35,000 / $75 - ($45 + $15) = 2,333 units
Purchase Price = $475 Per Unit
Units Produced = 290 Per Year
Fixed Costs = $50,000
Variable Over Head = $175 Per Unit
Labor Costs = $37 Per Unit
How many units need to be produced in order to break even? (Round up if needed)
$50,000 / $475 - ($175 + $37) = 191 units
Purchase Price = $32 Per Unit
Units Produced = 4,000 Per Year
Fixed Costs = $20,000
Variable Over Head = $12 Per Unit
Labor Costs = $6 Per Unit
Should this company produce or buy its products?
Make it themselves
Purchase Price = $55
Units Produced = 15,000
Fixed Costs = $75,000
Variable Over Head = $45
Labor Costs = $15,000
Should this company produce or buy its products?
Buy its products
Purchase Price = 75
Units Produced = 450
Fixed Costs = $35,000
Variable Over Head = $45 per unit
Labor Costs = $15 per unit
Should this company produce or buy its products?
Buy The Products
Purchase Price = $475 Per Unit
Units Produced = 290 Per Year
Fixed Costs = $50,000
Variable Over Head = $175 Per Unit
Labor Costs = $37 Per Unit
Should this company produce or buy its products?
Produce