The Walla Walla Corporation produces an executive jet for which it currently manufactures a fuel valve; the cost of the valve is indicated below:<\/p>
<\/p>
Cost per UnitVariable costs<\/strong>Direct material$957Direct labor621Variable overhead306Total variable costs$1,884Fixed costs<\/strong>Depreciation of equipment488Depreciation of building189Supervisory salaries319Total fixed costs996Total cost$2,880<\/p> The company has an offer from Duvall Valves to produce the part for $2,056 per unit and supply 930 valves (the number needed in the coming year). If the company accepts this offer and shuts down production of valves, production workers and supervisors will be reassigned to other areas where, unfortunately, they really are not needed. The equipment cannot be used elsewhere in the company, and it has no market value. However, the space occupied by the production of the valve can be used by another production group that is currently leasing space for $54,660 per year.<\/p> <\/p> Should the company make or buy the valve?<\/p>",
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"authors": "Gerald E. Whittenburg, Martha Altus Buller, Steven L Gill",
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"question_posted": "2024-06-28 07:40:30",
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