Submissions are not permanently recorded 6-B1 Make or Buy Suppose a BMW executive in Germany is trying to decide whether the company should continue to manufacture an engine component or purchase it from Frankfort Corporation for 52 each Demand for the coming year is expected to be the same as for the current year, 200,000 units Data for the current year follow 5,000,000 1,900,000 1,100,000 2.500.000 10,500,000 Direct material Direct labor Factory overhead, variable Factory overhead fixed Total costs If BMW makes the components, the unit costs of direct material, will increase 10%. If BMW buys the components, 40% of the fixed costs will be avoi ded. The other 60% will continue regardless of whether the components are manufactured or purchased. Assume that variable overhead varies with output volume 1. Compute the numerical difference between making and buying. Assume that the capacity now used to make the components will become idle if the components are purchased. 900000 ! Submissions to practice problems are not permanently recorded. 2. Assume that the BMW capacity in question can be rented to a local electronics firm for 1,250,000 for the coming year. Compute the numerical difference between making and buying. Tries 0/5 3. At what volume level will BMW be indifferent between making and buying? Tries 0/5