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II. Problem #1 - Make or Buy (12 points) Lasso Corporation manufactures Part B89 in its internal processing division. Lasso produces 11,000 units of Part
II. Problem #1 - Make or Buy (12 points) Lasso Corporation manufactures Part B89 in its internal processing division. Lasso produces 11,000 units of Part B89 annually. The annual costs to produce Part B89 at the level of 11,000 units include: Direct materials $3.20 Direct labor $8.30 Variable manufacturing overhead $4.20 Fixed manufacturing overhead $3.00 Total cost $18.70 All of the fixed manufacturing overhead costs would continue whether Part B89 is made internally or purchased from an outside supplier. Assuming Lasso can purchase 11,000 units of the part from the Nadal Parts Company for $20.50 each, and the facilities currently used to make the part could be rented out to another manufacturer for $18,000 a year Using the information provided perform or answer the following: a. Calculate the savings or additional cost per unit to buy the part. b. Calculate the total savings or additional cost to buy the part. e. Should Lasso buy the part or continue to make the part? d. What is the minimum rent Lasso would need to collect to consider buying the part
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