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17 January, 09:08

Marigold Corp. can produce 100 units of a component part with the following costs:

Direct Materials $21000

Direct Labor 5500

Variable Overhead 19000

Fixed Overhead 11000

If Marigold Corp. can purchase the units externally for $50000, by what amount will its total costs change?

A. An increase of S4500

B. An increase of $50000

C. An increase of $15S00

D. A decrease of $11000

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Answers (1)
  1. 17 January, 09:10
    0
    A. An increase of $4,500

    Explanation:

    For computing the total cost change, first we have to determine the total cost which is shown below

    = Direct Materials cost + Direct Labor costs + variable overhead costs

    = $21,000 + $5,500 + $19,000

    = $45,500

    And, the outside purchase is $50,000

    So, the total cost change would be

    = $50,000 - $45,500

    = $4,500 increase
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