Calculator eBook Make-or-Buy Decision, Alternatives, Relevant Costs Each year, Basu Company produces 21,000 units of a component Direct materials Direct labor Variable overhead Foxed overhead used in microwave ovens. An outside supplier has offered to supply the $0.74 Total unit cost 3.84 1. What are the altermatives for Basu Company? Make the part in house or buy the part externally 2. Assume that none of the fixed cost is avoidable. List the relevant cost(s) of internal production Direct materials, direct labor and variable overhead v List the relevant cost(s) of external purchase. 3. Which alternative is more cost effective and by how much? Haking the part in house by 4. What if $19,760 of fixed overhead is rental of equipment used only in production of the component that can be avoided if the component is Buying the part from the external supplierby 1. Review what you have learned in the chapter 2Relevant costs are future c s. Set up the analysis with the relevant c costs that differ across alternatives. For each cost given, ask yourself if the company would incur different amo costs organized under a colurmn heading for each alternative. What is the difference between the tw If so, redo the analysis to account for this cost. What is the difference between the two alter MSFC Agreements . Anrm of a component used in microwave ovens. An outside supplier has offered to supply the part for $1.27, The unilt cost is ernally ble. List the relevant cost(s) of internal production overhead w 1 by how much? of equipment used only in production of the composent that can be avoided i the component is purchased? Which aternative is more cost effective and by how much? he chapter t differ across aternatives. For each cost given, ask yourself if the cempany would incur dfferent amounts of the costs, in total, for each abernative ant costs orgarized under a column heading for each aternative. What is the difference between the two altersatives? ternatives? f so, redo the analysis to account for this cost. What is the difference between the two aternatives