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PART 1 (15 minutes) Birzeit Electric Company manufactures small electric motors for which a small part is needed. The following cost data have been
PART 1 (15 minutes) Birzeit Electric Company manufactures small electric motors for which a small part is needed. The following cost data have been accumulated for the 20,000 parts the company manufactured during the previous year: Direct materials Direct labor Variable manufacturing overhead Fixed manufacturing overhead $ 32,000 $88,000 $72,000 $112,000 The company can buy the part from another firm for $15 per unit. If the firm buys the item, it will be able to reduce fixed manufacturing overhead costs by $60,000 per year. It will also be able to rent some of the facilities currently used to make the part to another firm for $50,000. Required: Should the company continue to make the part, or should it be purchased from the other firm?
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