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Make or Buy Decision Village Building Co. manufactured 6,000 units of a component part that is used in its product and incurred the following costs:

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Make or Buy Decision Village Building Co. manufactured 6,000 units of a component part that is used in its product and incurred the following costs: Another company has offered to sell the same component part to the company for $13 per unit. The fixed manufacturing overhead consists mainly of depreciation on the equipment used to manufacture the part and would only be reduced by $2,000 dollars if the component part was purchased from the outside firm. If the component part is purchased from an outside firm, Village Co. has the opportunity to use the factory equipment to produce another product which is estimated to have a contribution margin of $24,000 Prepare an incremental analysis report for Village Building Co which can help management in this make-or-buy decision. Be sure to organize your work well and name (label) all numbers. Show all calculations. Which is more profitable for Village Building Co.: to make or to buy this component of its product? Explain your response

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