Q6.MAKE VS BUY

Maple Garden Produts(MGP)currently purchases BBQsauce from an external suplier but is thinking about bringing itin-house.

Each barrel of BBQ sauce cost S64 per barrel.

Transportation costs were paid by MGP and were S8 per barrel

MGP ran 24 hours a day for five days a week(each day had three separate eight-hourshits).

The average worker wage was S20/per HR.

Workers take an average of 10 minutes to handle eah barrel(including sanitation, adding other componets,etc.)

Additoinal procurement costs (including overhead)were S0.02 per gallon.

if MGP were to instead produce the productinternally,the following would occur:

The mix would be 60% ketchup,20% mayo, and 20% water.

Ketchup wpuld cost sp.15 pergallon, including freight.

Mayo costs 50.1875 per gallon but is delivered in 15,000gallon quantitie.

Water would only cost 50.025 per gallon.

The production department believes the change to in-house would not require any incremental workers.

However,producingin-house would take up more of the crrent staffs time.

isestimated that moving in-house would lead to total other costs(DLand MOH)ofapproximatel S0.105pergallonofBBQsaue

This was under an assumption of standard costing.

should MGP make or buy the product?