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A component can be bought in for $34.20 with an inbound shipping charge of $3.70. What is the relevant cost of buying one unit?
A$34.20 per case
B$37.90 per case
C$36.40 per case
D$43.50 per case
Answer & Solution
Correct answer: B. $37.90 per case
1. Buying in brings two costs that would not arise if the part were made.
2. The purchase price is $34.20 per unit.
3. Inbound shipping adds a further $3.70 per unit.
4. $34.20 plus $3.70 gives $37.90 per unit.
5. Quoting the $34.20 alone forgets that delivery is part of what buying costs.
_Source: Jonick, Principles of Managerial Accounting (UNG Press, CC BY-SA 4.0), section 9.2 Make or Buy a Component Part_
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