1 Make or Buy: 2 3 ABC Inc. manufactures a component internally which is used in its production. 4 5 The variable manufacturing costs associated for cach unit of product are $14 for variable costs (DM, DL, VOH) and a $4 allocation of Fixed Overhead per unit 6 7 Part 1: 9 Assume an outside supplier offfers to sell the components to ABC for $16 per unit. 10 Fixed costs would not change and the supplier is reliable and product quality is excellent. 11 12 What should the company do? What other factors would you consider? 13 14 Part 2: 15 16 Refer to Part I above. Suppose that ABC requires 10,000 components a year. 17 Once again, assume that fixed costs would not change and the supplier is reliable and product quality is excellent, 18 19 Now suppose that if the supplier is retained. ABU could sell its old manufacturing equipment for $25,900. 20 21 Would your decision change now? 22 23 Explain. 24 25 26 27