Question
Make-or-Buy, Traditional Analysis Wehner Company is currently manufacturing Part ABS-43, producing 53,700 units annually. The part is used in the production of several products made
Make-or-Buy, Traditional Analysis
Wehner Company is currently manufacturing Part ABS-43, producing 53,700 units annually. The part is used in the production of several products made by Wehner. The cost per unit for ABS-43 is as follows:
Direct materials | $47.00 |
Direct labor | 9.15 |
Variable overhead | 3.75 |
Fixed overhead | 3.85 |
Total | $63.75 |
Of the total fixed overhead assigned to ABS-43, $15,788 is direct fixed overhead (the annual lease cost of machinery used to manufacture Part ABS-43), and the remainder is common fixed overhead. An outside supplier has offered to sell the part to Wehner for $59.71. There is no alternative use for the facilities currently used to produce the part. No significant non-unit-based overhead costs are incurred.
Required:
1. Should Wehner Company make or buy Part ABS-43? Wehner should buy the part. This will produce total cost savings of $________.
2. What is the maximum amount per unit that Wehner would be willing to pay to an outside supplier? Round your answer to the nearest cent. $_______ per unit
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