Make-or-Buy, Traditional Analysis

Wehner Company is currently manufacturing Part ABS-43, producing 53,800 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	$42.30
Direct labor	10.20
Variable overhead	2.60
Fixed overhead	3.85
Total	$58.95

Of the total fixed overhead assigned to ABS-43, $12,428 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 $54.91. 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

makebuy

the part. This will produce total cost savings of $fill in the blank 2.

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. $fill in the blank 3 per unit