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Problem 7.37A a

Interdesign uses 1,000 units of the component IMC2 every month to manufacture one of its products. The unit costs incurred to manufacture the component are as follows:

Direct materials$ 65

Direct labour45

Overhead 126

Total$236

Overhead costs include variable material handling costs of $8, which are applied to products on the basis of direct material costs. The remainder of the overhead costs are applied on the basis of direct labour dollars and consist of 50% variable costs and 50% fixed costs.

A vendor has offered to supply the IMC2 component at a price of $200 per unit.

(a)

Should Interdesign purchase the component from the outside vendor if Interdesign's capacity remains idle?(If an amount reduces the net income then enter with a negative sign preceding the number, e.g. -15,000 or parenthesis, e.g. (15,000).)

b) Complete:

Units: 1000 Make Buy Net income increase or decrease

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