Standard costs and other data for two component parts used by Griffon Electronics are presented below:

In past years, Griffon has manufactured all of its required components; however, in \(20 \mathrm{X} 1\) only 30,000 hours of otherwise idle machine time can be devoted to the production of components. Accordingly, some of the parts must be purchased from outside suppliers. In producing parts, factory overhead is applied at \(\$ 1.00\) per standard machine hour. Fixed capacity costs, which will not be affected by any make-buy decision, represent \(60 \%\) of the applied overhead. The 30,000 hours of available machine time are to be utilized such that Griffon realizes maximum potential cost savings on Products A4 and B5.
{Required:}

(a) What are the relevant unit costs for making this decision?

(b) How should machine time be allocated to the products?

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Direct material........ Direct labor....... Factory overhead............ Unit standard cost......... Units needed per year. Machine hours per unit. Part A4 $0.40 Part B5 $ 8.00 1.00 4.70 4.00 2.00 $5.40 $ 14.70 6,000 8,000 4 2 $ 15.00 Unit cost if purchased. ................$5.00