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Xerox Manufacturing currently produces an electronic component used in one of its printers. Xerox must produce 10,000 of these parts. The firm has been approached
Xerox Manufacturing currently produces an electronic component used in one of its printers. Xerox must produce 10,000 of these parts. The firm has been approached by a supplier who offers to build the component to Xerox's specifications for $4.75 per unit. The full absorption cost for the 10,000 parts is computed as follows: Total Cost Unit Cost Rental of equipment $12,000 $1.20 Equipment depreciation 2,000 0.20 Direct materials 10,000 1.00 Direct labor 20,000 2.00 Variable overhead 8,000 0.80 General fixed overhead 30.000 3.00 Total $82.000 $8.20 Enough material is on hand to make 5,000 parts Required: Prepare computation to evaluate the cost make or buy for 5000 units. Which decision should be chosen
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