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The management of Oriole Manufacturing Company is trying to decide whether to continue manufacturing a part or to buy it from an outside supplier.
The management of Oriole Manufacturing Company is trying to decide whether to continue manufacturing a part or to buy it from an outside supplier. The part, called WISCO, is a component of the company's finished product. The following information was collected from the accounting records and production data for the year ending December 31, 2022: 1. The machining department produced 8.500 units of WISCO during the year. 2. Variable manufacturing costs applicable to the production of each WISCO unit were direct materials $4.80, direct labour $4.90, indirect labour $0.43, and utilities $0.33. 3. Fixed manufacturing costs applicable to life production of WISCO were as follows: Cost Item Direct Allocated Depreciation $1,930 $890 $2,820 Property taxes Insurance 510 105 615 915 560 1,475 $3,355 $1,555 $4,910 The company will eliminate all variable manufacturing and direct fixed costs if it purchases WISCO. Allocated costs will have to be absorbed by other production departments. So if WISCO is purchased, the fixed manufacturing costs allocated to WISCO will have to be absorbed by other production departments.
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