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Question 2 - make or buy decision: All I'm Saying Corporation makes 45,000 units per year of a part (smart phone screens) it uses in
Question 2 - make or buy decision: All I'm Saying Corporation makes 45,000 units per year of a part (smart phone screens) it uses in the products it manufactures (smart phones). The unit product cost of this part is computed as follows: Direct materials $10.95 Direct labor 18.00 Variable manufacturing overhead 6.80 Fixed manufacturing overhead 12.00 Unit product cost $47.75 An outside supplier has offered to sell the company all of these parts it needs for $46.00 a unit. If the company accepts this offer, the facilities now being used to make the part could be used to make more units of a product that is in high demand. The additional contribution margin on this other product would be $55,000 per year. If the part were purchased from the outside supplier, all of the variable costs, including direct labor cost of the part, would be avoided. However, $4.00 of the fixed manufacturing overhead cost being applied to the part would continue even if the part were purchased from the outside supplier. This fixed manufacturing overhead cost would be reallocated to the company's remaining products. What is the financial advantage / (disadvantage) of purchasing the part from the outside supplier rather than making it
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