=+A12-4 Make-or-buy decision Hie president ofMonarch Materials Inc., Todd Bentley, asked the controller, Megan Mayfield, to provide an analysis of a make vs. buy decision for material TS-101. The material is presently processed in Monarch’s Roanoke facility. TS-101 is used in processing offinal products in the faci lity. Megan determined the following unit production costs for the material as ofMarch 15, 2008.

Direct materials $ 7.50 Direct labor 2.70 Variable factory overhead 1.20 Fixed factory overhead 2.00 Total production costs per unit $13.40 In addition, material TS-101 requires special hazardous material handling. This special handling adds an additional cost of $1.60 for each unit produced.

Material TS-101 can be purchased from an overseas supplier. The supplier does not pres¬

ently do business with Monarch Materials. This supplier promises monthly delivery ofthe material at a price of $10.10 per unit, plus transportation cost of $0.40 per unit. In addition, Monarch would need to incur additional administrative costs to satisfy import regulations for hazardous material. These additional administrative costs are estimated to be $0.80 per purchased unit. Each purchased unit would also require special hazardous material handling of

$1.60 per unit.