Question
The Outland Company manufactures 1,000 units of a part that could be purchased from an outside supplier for $12 each. Outland's costs to manufacture each
The Outland Company manufactures 1,000 units of a part that could be purchased from an outside supplier for $12 each. Outland's costs to manufacture each part are as follows:
Direct materials$2
Direct labor3
Variable manufacturing overhead4
Fixed manufacturing overhead8
Total$17
All fixed overhead is unavoidable and is allocated based on direct labor. The facilities that are used to manufacture the part have no alternative uses.
Calculate relevant cost to make.
Calculate net cost to buy if Outland leases the manufacturing facilities to another company for $5,000 per year.
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