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Lincoln Company produces a part that is used in the manufacture of one of its products. The unit manufacturing costs of this part, assuming a
- Lincoln Company produces a part that is used in the manufacture of one of its products. The unit manufacturing costs of this part, assuming a production level of 5,000 units, are as follows:
Direct materials | $3 |
Direct labor (variable cost) | 5 |
Variable manufacturing overhead | 4 |
Fixed manufacturing overhead | 2 |
Total cost | $14 |
Erickson Company has offered to sell 5,000 units of the same part to Lincoln Company for $13 per unit. Assuming the company has no other use for its facilities and that the fixed manufacturing costs are unavoidable, what should Lincoln Company do, make it or buy it? **Show your work to support your answer.
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