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Bell Company must decide whether to make or buy subassembly XYZ. Bell Company needs 10,000 units of subassembly XYZ. A cost analyst has prepared the
Bell Company must decide whether to make or buy subassembly XYZ. Bell Company needs 10,000 units of subassembly XYZ. A cost analyst has prepared the following estimates on making the subassembly: Direct materials costs Direct labor costs Variable overhead costs $4 per unit 6 per unit 6 per unit Total variable costs $16 per unit Additional setup and maintenance costs Allocated fixed factory overhead $30,000 60,000 Total fixed costs $90,000 per year Tracy Manufacturing LLC is willing to sell Bell Company the subassembly for $20 per unit Required: Should Bell Company make or buy the subassembly? Support your answer with analysis
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