• Soho Company manufactures a two-in-one video system consisting of a DVD player and a digital media receiver.   The costs per unit when 10,000 DVD players are produced are:

   

          Direct materials                                                   $15

          Direct manufacturing labour                                63

          Variable manufacturing overhead                        25

          Fixed manufacturing overhead                            33                           

             Total                                                                $136

   

  Broadfield Inc, a manufacturer of DVD players, offers to sell to Soho Company 10,000 DVD players for $125. The plant facilities could be used to manufacture another part at a savings of $180,000 if Soho Company accepts the offer. In addition, $20 per unit of fixed manufacturing overhead on the original part would be eliminated.

   

  Required:

  Should Soho Company make or buy the part?  Show calculations.