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Part 043 is used In one of Scheetz Corporation's products. The company's Accounting Department report: the following costs of producing the 16,300 units of the
Part 043 is used In one of Scheetz Corporation's products. The company's Accounting Department report: the following costs of producing the 16,300 units of the part that are needed every year. Per Unit Direct materials $3.58 Direct labor 14.28 Variable overhead $7.28 Supervisor's salary 47.98 Depreciation of special equipment $8.58 Allocated general overhead $5.58 An outside supplier has offered to make the port and sell It to the company for $31.0 0 each. Ifthis offer is accepted, the supervisor's salary and all of the variable costs, Including direct labor, can be avoided. The special equipment used to make the part was purchased many years ago and has no salvage value or other use. The allocated general overhead represents fixed costs of the entire company. If the outside supplier's offer were accepted, only $22,300 of these allocated general overhead costs would be avoided. Required: a. Prepare s report that shows the effect on the company's total net operating Income of buying part 043 from the supplier rather than continuing to make it Inside the company. (Input the amount as a positive value.] Make Buy Total cost b. Which alternative should the company choose? O Make Buy
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