Hello

There are answers available in the database. some answers are not correct. especially for the second part.

Please help me on this.

Thank you

The Hyatt Company is trying to decide whether it should continue to make its sub-assemblies or if it should purchase them from an outside supplier for $9.00 each.Currently, 40,000 units per year are manufactured internally, with the following costs:

Direct Materials	$ 3.00
DirectLabour	$ 4.20
Variable Overhead	$ 0.60
Fixed Overhead*	$ 3.70
Total Manufacturing Cost per Unit	$ 11.50

* The fixed overhead cost consists of $0.80 for supervision**, $0.90 for taxes and $2.00 for rent.

** The supervisor position would be eliminated if the sub-assemblies were sourced outside.

Required:

1. Prepare an analysis of the two alternatives and make a recommendation. 14 Marks
2. Assume that Hyatt could use the facilities to expand production for another product that would yield an additional contribution margin of $80,000 annually. What is the maximum price Hyatt should be willing to pay the outside supplier for the sub-assemblies? 6 Marks