2.) A company currently buys a key part for a product it manufactures. The company buys the part for $5 per unit and believes it can make the part for S1.50 per unit for direct materials and $2.50 per unit for direct labor. The company allocates overhead costs at the rate of 50% of direct labor. Incremental overhead costs to make this part are S0.75 per unit. Should the company make or buy the part? Create a Total Cost per unit comparison for make or buy options.

2.) A company currently buys a key part for a product it manufactures. The company buys the part for $5 per unit and believes it can make the part for S1.50 per unit for direct materials and $2.50 per unit for direct labor. The company allocates overhead costs at the rate of 50% of direct labor. Incremental overhead costs to make this part are S0.75 per unit. Should the company make or buy the part? Create a Total Cost per unit comparison for make or buy options.

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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