W. T. Ginsburg Engine Company manufactures part ACT30107 used in several of its engine models. Monthly production costs for 1,090 units are as follows: Direct materials $46,000 Direct labor 10,500 Variable overhead costs 32,500 Fixed overhead costs 22,000 Total costs $111,000 It is estimated that 6% of the fixed overhead costs assigned to ACT30107 will no longer be incurred if the company purchases ACT30107 from the outside supplier. W. T Ginsburg Engine Company has the option of purchasing the part from an outside supplier at $94.75 per unit. If the company accepts the offer from the outside supplier, the monthly avoidable costs (costs that will no longer be incurred) total .

Cost that will no longer be incurred  =  $90320  

Explanation:                                                    

                                                                                      $

The relevant variable cost

= 46,000 + 10,500 + 32,500                                    $89,000

Cost of external supply

=  94.75 × 1090=                                                   $103,277.50  

Increase in of purchase                                           14,277.50  

Savings in fixed cost  (6%× 22,000)                         ( 1320

Net increase in cost if purchased                            12,957.50  

Cost that will no longer be incurred =  89,000 +1320    =  $90320

Cost that will no longer be incurred  =  $90320