Answered: Kingston Company, which needs 10,000…

Principles of Accounting Volume 2

19th Edition

ISBN:9781947172609

Author:OpenStax

Publisher:OpenStax

Chapter10: Short-term Decision Making

Section: Chapter Questions

Problem 6PA: Gent Designs requires three units of part A for every unit of Al that it produces. Currently, part A...

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Kingston Company, which needs 10,000 units of a certain part to be used in its production cycle, can make or buy the part. If Kingston buys the part from Utica Company, Kingston could not use the released facilities in another manufacturing activity within the coming year. 60% of the fixed overhead applied will continue regardless of which decision option is chosen. The following per-unit cost information to make the part by Kingston is available:


Direct materials	$	31
Direct labor		124
Variable overhead		62
Fixed overhead applied		78
	$	295
Cost to buy the part from Utica Company	$	79

In deciding whether to make or buy the part, Kingston's total relevant cost to make the part would be:

Multiple Choice

$2,344,000.
$2,482,000.
$790,000.
$2,950,000.
Some amount other than these choices.

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