Answer:
a. $143,000
b. $140,000
Explanation:
The computation is shown below:
a. For making 40,000 units
Particulars Relevant Amount per Unit Relevant Fixed Costs Total Relevant Costs
Variable cost per unit $1.95 $78,000
Fixed manufacturing costs $65,000 $65,000
Total incremental cost to make $143,000
The $78,000 is come from
= $1.95 × 40,000 units
= $78,000
b. And, for buying 40,000 units
Particulars Relevant Amount per Unit Relevant Fixed Costs Total Relevant Costs
Purchase price per unit $3.50 $140,000
The $140,000 is come from
= $3.50 × 40,000 units
= $140,000
