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Climate-Control, Inc., manufactures a variety of heating and air-conditioning units. The company is currently manufacturing all of its own component parts. An outside supplier has
Climate-Control, Inc., manufactures a variety of heating and air-conditioning units. The company is currently manufacturing all of its own component parts. An outside supplier has offered to sell a thermostat to Climate-Control for $24 per unit. To evaluate this offer, Climate-Control, Inc., has gathered the following information relating to its own cost of producing the thermostat internally: 14,600 Per Units Unit per year S 5 S 73,000 7 102,200 4 58,400 9 131,400 Fixed manufacturing overhead, common, but allocated 9 131,400 Direct materials Direct labor Vari able manufacturing overhead Fixed manufacturing overhead, traceable Total cost $ 34 $496,400 "40% supervisory salaries, 60% depreciation of special equipment (no resale value) Required 1a. Assuming that the company has no alternative use for the facilities now being used to produce the thermostat, compute the total cost of making and buying the parts. (Round your Fixed manufacturing overhead per unit rate to two decimal places in intermediate calculations.) Per Unit Differential Costs 14600 Units Make Buy Make Buy Cost of purchasing Direct materials Direct labor Variable manufacturing overhead Fixed manufacturing overhead, traceable Fixed manufacturing overhead, common Total costs Difference in favor of making (buying) 0.00 0.00 $
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