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Beto Company pays $5.70 per unit to buy a part for one of the products it manufactures. With excess capacity, the company is considering making
Beto Company pays $5.70 per unit to buy a part for one of the products it manufactures. With excess capacity, the company is considering making the part. Making the part would cost $6.00 per unit for direct materials and $1.00 per unit for direct labor. The company normally applies overhead at the predetermined rate of 200% of direct labor cost. Incremental overhead to make the part would be 80% of direct labor cost. (a) Prepare a make or buy analysis of costs for this part. Note: Enter your answers rounded to 2 decimal places. (b) Should Beto make or buy the part? Gelb Company currently makes a key part for its main product. Making this part incurs per unit variable costs of $1.70 for direct materials and $1.25 for direct labor. Incremental overhead to make this part is $1.60 per unit. The company can buy the part for $4.80 per unit. (a) Prepare a make or buy analysis of costs for this part. Note: Enter your answers rounded to 2 decimal places. (b) Should Gelb make or buy the part
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