Of the fixed factory overhead costs, $72,000 are avoidable. Another company has offered to sell 5,000 units of the same part to Gonzalez for $70.00 per unit. The facilities currently used to make the part can be rented out to another manufacturer for $72,000 per year. What should Gonzalez Company

Gonzalez Company Should buy the part and rent the premises to save $22,000

Explanation:

Applicable expenses are costs which are acquired just when a choice is taken. In the current issue, we need to just consider the important costs identified with creation which will be caused just if creation is finished

Fixed processing plant overhead which is avoidable will just frame some portion of applicable expense as unavoidable fixed overhead is a sunk expense as it must be acquired by the association regardless of whether creation isn't finished

Lease which could have been earned if the industrial facility was not utilized for creation is an open door cost of creation thus will frame some portion of pertinent expense of creation

These expenses are as per the following:

Direct materials $100,000 + Direct work $56,000 + Variable industrial facility overhead $72,000 + Avoidable fixed overhead $72,000 + Opportunity cost of lease inevitable $72,000

= $372,000

Cost of purchasing = Number of units x Price per unit

Cost of purchasing = 5,000 x $70

Cost of purchasing = $350,000

Along these lines, Net advantage of purchasing the part and leasing the office

= Relevant expense of Cost of creation - Cost of purchasing

= $372,000 - $350,000

= $22,000