Nadine company has offered to sell to duck company 10000


Duck Company manufactures a part for use in its production of hats. When 10,000 items are produced, the costs per unit are:

        Direct materials                                               $0.60

        Direct manufacturing labor                           3.00

        Variable manufacturing overhead              1.20

        Fixed manufacturing overhead                    1.60

                Total                                                            $6.40

Nadine Company has offered to sell to Duck Company 10,000 units of the part for $6.00 per unit. The plant facilities could be used to manufacture another item at a savings of $9,000 if Duck accepts the offer. In addition, $1.00 per unit of fixed manufacturing overhead on the original item would be eliminated.

Required:

a. What is the relevant per unit cost for the original part?

b. Which alternative is best for Duck Company? By how much?

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Financial Accounting: Nadine company has offered to sell to duck company 10000
Reference No:- TGS01655151

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