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(Solved) (Latest ver. Aug 2020) - Make or Buy Decisions

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Given the following data, please answer the following:

Total Cost for 50,000 Units Cost per Unit

Direct materials $ 400,000 $ 8
Direct labor 250,000 5
Variable factory overhead 150,000 3
Fixed factory overhead 300,000 6
Total manufacturing costs $1,100,000 $22

1.Assume that the capacity now used to make parts will become idle if the parts are purchased. Should Dana buy or make the parts? Show computations.

2.Assume that the capacity now used to make parts will either (a) be rented to a nearby manufacturer for $75,000 for the year or (b) be used to make oil filters that will yield a profit contribution of $100,000. Should Dana buy or make part EC113? Show your computations.

 







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This question was answered on: Sep 16, 2020

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