Question
32 Microline is considering buying computer cabinets from an outside vendor. Currently, Microline makes the cabinets in its own manufacturing facility. Microline can buy the
32 Microline is considering buying computer cabinets from an outside vendor. Currently, Microline makes the cabinets in its own manufacturing facility. Microline can buy the cabinets for $15 each. The company uses 15,000 cabinets each year. Information about Microline's cost to manufacture the 15,000 cabinets follows:
Per Unit Total
Direct material $ 4 $ 60,000
Direct labor 6 90,000
Variable overhead 7 105,000
Fixed overhead 5 75,000
Total $22 $330,000
Fixed cost for Microline would not change if the company stopped making the cabinets.
REQUIRED:
Prepare a relevant cost schedule that indicates whether Microline should buy the cabinets or continue to make them.
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