QS 25-5 (Algo) Make or buy LO P1 Kando Company currently pays $18 per unit to buy a part for a product it manufactures. Instead, Kando could make the part for per unit costs of $8 for direct materials, $5 for direct labor, and $2 for incremental overhead. Kando normally applies overhead costs using a predetermined rate of 200% of direct labor cost (a) Prepare a make or buy analysis of costs for this part. (b) Should Kando make or buy the part? Make Buy Direct materials Direct labor Overhead Cost to buy Cost per unit Company should QS 25-20 (Algo) Special offer pricing LO P7 Radar Company sells bikes for $490 each. The company currently sells 4,450 bikes per year and could make as many as 4,760 bikes per year. The bikes cost $255 each to make: $185 in variable costs per bike and $70 of fixed costs per bike. Radar receives an offer from a potential customer who wants to buy 310 bikes for $450 each. Incremental fixed costs to make this order are $100 per bike. No other costs will change if this order is accepted (a) Compute the income for the special offer. (b) Should Radar accept this offer? (a) Special offer analysis Per Unit Total $ Sales Variable costs Contribution margin Fixed costs (incremental) Income 450 $ 185 265 $ 139,500 57,350 88,350 31,000 57,350 $ 100 165 $ (b) The company should Accept special offer