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

Question

Rubio

Business

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

+3

Answers (1)

Know the Answer?

Andreas Salinas · Answer 1

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