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A business is operating at 90% of capacity and is currently purchasing a part used in its manufacturing operations for P15 per unit. The unit cost for the business to make the part is P20, including fixed costs, and P12, not including fixed costs. If 30,000 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?     P150,000 cost increase P 90,000 cost decrease P150,000 cost increase P 90,000 cost increase

A business is operating at 90% of capacity and is currently purchasing a part used in its manufacturing operations for P15 per unit. The unit cost for the business to make the part is P20, including fixed costs, and P12, not including fixed costs. If 30,000 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?     P150,000 cost increase P 90,000 cost decrease P150,000 cost increase P 90,000 cost increase

Principles of Cost Accounting
Principles of Cost Accounting
17th Edition
ISBN:9781305087408
Author:Edward J. Vanderbeck, Maria R. Mitchell
Publisher:Edward J. Vanderbeck, Maria R. Mitchell
Chapter10: Cost Analysis For Management Decision Making
Section: Chapter Questions
Problem 16E
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A business is operating at 90% of capacity and is currently purchasing a part used in its manufacturing operations for P15 per unit. The unit cost for the business to make the part is P20, including fixed costs, and P12, not including fixed costs. If 30,000 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?
 
 
P150,000 cost increase
P 90,000 cost decrease
P150,000 cost increase
P 90,000 cost increase
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