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Company Z currently pays $20 per component to purchase a tool for an item it makes. Company Z could make the tool for unit costs
Company Z currently pays $20 per component to purchase a tool for an item it makes. Company Z could make the tool for unit costs of $9 for direct materials, $7 for direct labor, and $5 for incremental overhead. Company Z normally applies overhead costs using a default rate of 155% of direct labor cost. Determine if the Company should make the utensil or buy it? Explain your answer and present the calculations that justify your answer.
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