Watanabe Company is currently manufacturing Part NIM-06, producing 15,000 units annually. The part is used in the production of several products made by Watanabe.

The cost per unit for NIM-06 is as follows:

Of the total fixed overhead assigned to NIM-06, \($12,000\) is direct fixed overhead (the annual lease cost of machinery used to manufacture Part NIM-06), and the remainder is common fixed overhead. An outside supplier has offered to sell the part to Watanabe for \($94\). There is no alternative use for the facilities currently used to produce the part. No significant non-unit-based overhead costs are incurred.
Required:
1. Should Watanabe Company make or buy Part NIM-06?
2. What is the maximum amount per unit that Watanabe would be willing to pay to an outside supplier?

Transcribed Image Text:

Direct materials $70.00 Direct labor 20.00 Variable overhead 3.00 Fixed overhead 1.50 Total $94.50