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Question at position 10 The cost system of Charlton Fabricators indicates that a product cost $30 to make in house. Of that $30 cost, $7 consists of plant costs that have already been paid for. A supplier proposes to make the same product for $26 but Charlton's plant will have idle time and because of budgetary constraints, will not be retooled to take advantage of that idle time. Should the product be outsourced to the supplier? Yes, because the Supplier can produce the product for $11.00 less per unit than Charlton can.Yes, because the Supplier can produce the product for $4.00 less per unit than Charlton can.No because the plant can be utilized for other purposes and either save the company even more money or produce additional revenue.No because the relevant cost for making the product is only $23 .题目解析
Options
A.Yes, because the Supplier can produce the product for $11.00 less per unit than Charlton can.
B.Yes, because the Supplier can produce the product for $4.00 less per unit than Charlton can.
C.No because the plant can be utilized for other purposes and either save the company even more money or produce additional revenue.
D.No because the relevant cost for making the product is only $23 .
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To start, let’s outline what the problem is asking: should Charlton outsource the product given the in-house cost and the supplier’s bid, considering which costs are relevant to the decision?
Option A: Yes, because the Supplier can produce the product for $11.00 less per unit than Charlton can. This statement looks appealing if you only compare the total per-unit prices ($26 vs $30), but it ignores which costs Charlton actually must incur and which costs are already paid or sunk. The $7 of plant costs that have already been paid are sunk and should not factor into the ongoi......Login to view full explanationLog in for full answers
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