. Make or Buy Decision. Hillman Company produces a line of iron and steel building products. The product lines include numerous subassemblies and parts. Many of these parts can be either produced in Department 8 or outsourced. Four parts are listed below with their related cost and production data, including normal batch sizes and estimated setup costs:

Department 8's facilities are flexible in that these parts can be produced in any combination. Department 8's capacity is 300,000 machine hours. Materials and labor costs are considered variable. Batch sizes and setup costs are estimated based on past experience. Overhead costs, except for setup costs, are fixed. Total overhead is assigned to products at the rate of 300 percent of direct labor cost, established after preparing the factory overhead budget.
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Write a memo presenting your recommendation and describing your decision logic for producing and outsourcing.

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Iron Frames Steel Frames Steel Housing Assembly Unit # 10 # 11 # 12 # 13 Materials cost... $5.00 $ 6.00 $18.00 $ 8.00 Variable labor cost Overhead cost (excluding setup costs) 1.50 1.00 5.00 3.00 4.50 3.00 15.00 9.00 Time required per unit 1 hour 4 hours 5 hours 2 hours Units required.... 80,000 40,000 15,000 100,000 Batch size (in units). 10,000 10,000 3,000 5,000 Estimated setup costs per batch $4,000 $3,000 $3,000 $2,000 Outsourcing prices $10.00 $11.00 $32.00 $18.00