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Gilberto Company currently manufactures one of its crucial parts at a cost of $3.85 per unit. This cost is based on a normal production rate
Gilberto Company currently manufactures one of its crucial parts at a cost of $3.85 per unit. This cost is based on a normal production rate of 60,000 units per year. Variable costs are $2.10 per unit, fixed costs related to making this part are $60,000 per year, and allocated fixed costs are $45,000 per year. Allocated fixed costs are unavoidable whether the company makes or buys the part. Gilberto is considering buying the part from a supplier for a quoted price of $3.30 per unit guaranteed for a three-year period.
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