ACSB Alliance Member . KINGDOM OF SAUDI ARABIA A Make or Buy Decision Snow Corporation manufactures commercial ovens for use in restaurant kitchens, Snow is planning to produce a new oven suitable for large hotel kitchens. These hotel ovens require a component that Snow can either make or buy from a supplier. The supplier will sell the component for $29. The costs for making the 18,000 components needed are: Directmaterials Direct labor Variable overhead Fixed overhead $12 per unit $9 per unit $6 per unit $60,000** . **Includes $24,000 of indirect fixed costs allocated to the part and $36,000 for a production manager dedicated to this production. If the componentis produced, Snow will use an idle machine it already owns. If the component is bought, Snow plans to rent the machine and the factory space to another company for $8,000 and $14,000 a year, respectively. If the componentis produced, Snow will be able to schedule production so that no warehouse space will be needed. However, if the componentis bought, Snow will need warehouse space, for which it will have to pay $2,000 a O a year in rent. Business VISION CBA COLLEGE OF BUSINESS PRINCE SULTAN &SITY A Special Order Decision The Killian Company manufactures two skin-care lotions, Liquid Skin and Silken Skin, out of a joint . process. The joint (common) costs incurred are $420,000 for a standard production run that generates 180,000 gallons of Liquid Skin and 120,000 gallons of Silken Skin. Additional processing costs beyond the split-off point are $1.40 per gallon for Liquid Skin and $0.90 per gallon for Silken Skin. Liquid Skin sells for $2.40 per gallon while Silken Skin sells for $3.90 per gallon. Killian typically does one production run per month, and has not yet manufactured any product this month. What is the profit normally earned in one production run of Liquid Skin and Silken Skin? BusinesS VISIONAL Areas