Futura Company purchases starters from a supplier at $ per unit that it installs in farm tractors. Due to a reduction in output, the company now has enough idle capacity to produce the starters rather than buying them from the supplier. However, the companys chief engineer is opposed to making the starters because the production cost per unit is $ as shown below:

Per Unit Total

Direct materials $

Direct labor

Supervision $

Depreciation $

Variable manufacturing overhead

Rent $

Total product cost $

If Futura decides to make the starters, a supervisor would be hired at a salary of $ to oversee production. However, the company has sufficient idle tools and machinery such that no new equipment would have to be purchased. The rent charge above is based on space utilized in the plant. The total rent on the plant is $ per period.

Required:

What is the financial advantage disadvantage of making the starters instead of buying them from an outside supplier?

Answer rating: 100% (QA)

Financial Advantages of Making Starters InHouse There is a financial advantage to Futura Company mak... View the full answer