Golden, Inc., has been manufacturing 5,000 units of Part 10541 which is used to manufacture...
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Golden, Inc., has been manufacturing 5,000 units of Part 10541 which is used to manufacture one of its products. At this level of production, the cost per unit of manufacturing Part 10541 is as follows: Direct materials Direct labor Variable overhead $ 2 8 4 6 $20 Fixed overhead applied Total A nearby supplier has offered to sell Golden 5,000 units of Part 10541 for $19 per unit. Golden has also determined that two-thirds of the fixed overhead applied will continue even if Part 10541 is purchased from the supplier. Required: Answer the questions that appear in the text box below. Show work where applicable Q1: In the table below, enter the relevant costs (expressed in total dollars, not per unit) associated with making the part or buying from the supplier (show your work, but only enter your total amounts in the table): Make Buy Relevant Costs Q2: What should Golden do? Explain. Q3: Now assume that if Golden accepts the offer from the supplier, they could use the capacity currently used to manufacture Part 10541 to manufacture another product, RAC, and generate an operating profit of $4,000. What impact would this have on the decision? Be sure to defend your
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