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E 8 - 6 Make - or - Buy Decisions Tricia Company has been manufacturing 9 , 0 0 0 units of part Y for
E MakeorBuy Decisions
Tricia Company has been manufacturing units of part Y for its products. The unit
cost for the part is as follows:
Direct materials $
Direct labor
Variable manufacturing overhead
Fixed manufacturing overhead
Total $
A supplier has offered to sell units of part Y to Tricia for $ each. If the part is
purchased, Tricia can use its facilities to manufacture another product, which would
generate a contribution margin of $ Seventyfive percent of the fixed
manufacturing overhead costs are indirect and will still be incurred even if the part is
purchased.
Compute the net differential cost in deciding whether to make or buy the part.
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