Question
Wings Incorporated manufactures machine parts for aircraft engines. The CEO, Chucky Valters, was considering an offer from a subcontractor that would provide 3,400 units
Wings Incorporated manufactures machine parts for aircraft engines. The CEO, Chucky Valters, was considering an offer from a subcontractor that would provide 3,400 units of product PQ107 for Valters for a price of $150,000. If Wings does not purchase these parts from the subcontractor it must produce them in-house with the following unit costs: Direct materials Direct labor Variable overhead Cost per Unit $44 28 13 In addition to the above costs, if Wings produces part PQ107, it would have a retooling and design cost of $14,000. The relevant costs of producing 3,400 units of product PQ107 internally are:
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