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Bob Industries currently manufactures Part ABC for its main product. The costs per unit are as follows: Direct materials $40.00 Direct labor 30.00 Variable overhead
Bob Industries currently manufactures Part ABC for its main product. The costs per unit are as follows: Direct materials $40.00 Direct labor 30.00 Variable overhead 42.00 Fixed overhead 33.00 Total $145.00 Mountaineer Industries has contacted Bobcat with an offer to sell 8,000 of the part for $120.00 each. Bobcat will eliminate $60,000 of fixed overhead if it accepts the proposal. Should Bobcat make or buy the part? What is the difference between the two alternatives?
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