Make-or-Buy, Traditional Analysis

Wehner Company is currently manufacturing Part ABS-43, producing 55,000 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

$45.60

Direct labor

9.80

Variable overhead

2.75

Fixed overhead

3.90

Total

$62.05

Of the total fixed overhead assigned to ABS-43, $15,400 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 $58. There is no alternative use for the facilities currently used to produce the part. No significant non-unit-based overhead costs are incurred.

1.Should Wehner Company make or buy Part ABS-43?

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.