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2. Make or Buy Lion Company makes 10,000 units per year of a part it uses in the products it manufactures. The unit product cost
2. Make or Buy Lion Company makes 10,000 units per year of a part it uses in the products it manufactures. The unit product cost of this part is computed as follows: Direct materials Direct labor Variable manufacturing overhead | Fixed manufacturing overhead Unit product cost $ 13.2 20.8 3.00 10.90 47.90 An outside supplier has offered to sell the company all of these parts it needs for $43.20 a unit. $6.40 of the fixed manufacturing overhead cost being applied to the part would continue even if the part were purchased from the outside supplier. This fixed manufacturing overhead cost would be applied to the company's remaining products. (a). What is the net total dollar advantage or disadvantage of purchasing the part rather than making it? Please show all calculations and label items clearly. (15 points) (b). What is the maximum amount the company should be willing to pay an outside supplier per unit for the part if the supplier commits to supplying all 10,000 units required each year? (5 points)
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