General Manufacturing Company makes residential aluminum windows. A company has offered to supply General with the window crank assembly it needs for $3.50 each.

General uses 50,000 crank assemblies each year. The machinery used to make the window cranks is used to produce a variety of other subassemblies and products. The production cost for the window crank assemblies is as follows:

Required:

a. Prepare a schedule that shows the relevant cost and the preferred alternative of this make or buy decision.

b. Discuss the qualitative factors that General should consider when deciding whether to buy the window cranks from the outside supplier.

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Direct material Direct labor Variable manufacturing overhead Fixed manufacturing overhead Total $ 70,000 40,000 55,000 35,000 $200,000