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X Company uses 30 units of Part A per month in the production of its main product. The manufacturing cost per unit of Part A


X Company uses 30 units of Part A per month in the production of its main product. The manufacturing cost per unit of Part A are as follows:

Material P 2,000

Handling costs 200

Direct Labor 10,000

Factory Overhead (40% fixed) 20,000

Total P 32,200

Handling cost is applied at 10% of cost of direct materials and/or any purchased parts. Y Company, a producer of Part A has offered to supply the part for X at P 24,000 per unit. If X accepts Y's offer, the resulting idle facility may be used to produce another product which is expected to earn P 100,000 per month.

Required: Should the X make Part A or buy it from Y?

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