Make-or-Buy, Traditional Analysis

Wehner Company is currently manufacturing Part ABS-43, producing 52,200 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	$42.05
Direct labor	10.00
Variable overhead	2.60
Fixed overhead	3.85
Total	$58.50

Of the total fixed overhead assigned to ABS-43, $15,660 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 $54.46. 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

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