This is the variable manufacturing cost saved per unit plus $1.00 for fixed manufacturing cost saved per unit. The fixed manufacturing cost saved per unit was calculated as ($150,000 × .40) / 60,000 units, the theoretical capacity. This is incorrect for two reasons: (1) The total fixed manufacturing cost saved should be divided by the number of units used each month, not the theoretical capacity. (2) 40% of the fixed costs is the amount that would continue to be incurred if Aril were to buy Part 730 from an outside supplier, not the amount of fixed costs that could be saved.
This is the variable manufacturing cost saved per unit plus $1.50 for fixed manufacturing cost saved per unit. The fixed manufacturing cost saved per unit was calculated as ($150,000 × .60) / 60,000 units, the theoretical capacity. The total fixed manufacturing cost saved should be divided by the number of units used each month, not the theoretical capacity.
The maximum price that Aril should pay to an outside supplier is the amount per unit that it would save if it did not manufacture the units internally. The variable cost saved would be $11 per unit. The fixed cost saved would be, in total, $150,000 × .60, or $90,000. On a per unit basis, that would be $90,000 ÷ 30,000 units manufactured each month, or $3 per unit. So the maximum price Aril should pay an outside supplier is $11 (the variable manufacturing cost saved) plus $3 (the fixed manufacturing cost saved), which is $14.
This is the variable manufacturing cost saved per unit plus $2 for fixed manufacturing cost saved per unit. The fixed manufacturing cost saved per unit was calculated as ($150,000 × .40) / 30,000 units, which is incorrect. 40% of the fixed costs is the amount that would continue to be incurred if Aril were to buy Part 730 from an outside supplier, not the amount of fixed costs that could be saved.
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