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Tires Corp. produces a part that is used to manufacture one of its products. Total costs associated with the production of 10,000 units of the
Tires Corp. produces a part that is used to manufacture one of its products. Total costs associated with the production of 10,000 units of the part are as follows:
Direct materials | $90,000 |
Direct labor | $130,000 |
Variable factory overhead | $60,000 |
Fixed factory overhead* | $140,000 |
*$60,000 is avoidable.
Wired Company has offered to sell 10,000 units of the same part to Tires Corp. for $36 per unit. Assuming there is no other use for the facilities, should Tires Corp. make or buy the part? What is the savings per unit?
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