Gelb Company currently manufactures 49,000 units per year of a key component for its manufacturing process. Variable costs are $6.25 per unit, fixed costs related to making this component are $89,000 per year, and allocated fixed costs are $78,500 per year. The allocated fixed costs are unavoidable whether the company makes or buys this component. The company is considering buying this component from a supplier for $3.50 per unit. Calculate the total incremental cost of making 49,000 units and buying 49,000 units. Should it continue to manufacture the component, or should it buy this component from the outside supplier

If the company buys the component, income will increase by $223,750.

Explanation:

Giving the following information:

Units= 49,000

Variable costs are $6.25 per unit

Fixed costs= $89,000 per year

The company is considering buying this component from a supplier for $3.50 per unit.

We will take into account only the differential costs.

Make:

Total cost= 49,000*6.25 + 89,000= $395,250

Buy:

Total cost= 49,000*3.5= $171,500

From the beginning, we knew that the cost of buying was cheaper than the unitary variable cost of making the part.

If the company buys the component, income will increase by $223,750.

the answer is: guns or butter

hope i

-lavira : )

1   all nations face the problem of scarcity because there are limited resources and unlimited wants. nations do not have enough factors of production to produce everything that their population wants. entrepreneurial resources initiate businesses to make new goods and services; labor resources produce goods and services.

2 there are four factors of production: natural resources, labor resources, capital resources, and entrepreneurial resources. natural resources are raw materials from nature that are used to produce goods. trees, water, and grains are natural resources. some natural resources, such as wheat and cattle, are renewable

3 wants

things that you do not need to have in order to survive, but would like to have

needs

things that you must have in order to survive

goods

physical products

services

tasks that a business perform for customers

resources

items that people can use to make or obtain what they need or want

determine

to settle or decide by choice of alternatives or possiblities

4 i really dont know