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  3. the estimated costs of producing 6,000 units of a

The estimated costs of producing 6,000 units of a component are: ...

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Accounting

The estimated costs of producing 6,000 units of a component are:

Per Unit

Total

Direct Material

$10

$60,000

Direct Labor

8

48,000

Applied Variable Factory Overhead

9

54,000

Applied Fixed Factory Overhead

12

72,000

$1.5 per direct labor dollar

$39

$234,000

The same component can be purchased from market at a price of $29 per unit. If the component is purchased from market, 25% of the fixed factory overhead will be saved.

Should the component be purchased from the market?

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