A manufacturer is considering whether to make or buy a component used in its production. The annual cost of producing the 10,000 parts is as follows. Direct variable manufacturing costs $ 300,000 Direct fixed manufacturing costs $ 100,000 Allocated overhead $ 50,000 If the manufacture buys the component, the direct fixed manufacturing costs can be reduced by 35 per cent. What is the maximum unit purchasing price that makes purchasing a beneficial decision in comparison to making?

FINANCIAL ACCOUNTING
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ISBN:9781259964947
Author:Libby
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Chapter1: Financial Statements And Business Decisions
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A manufacturer is considering whether to make or buy a component used in its production. The annual cost of producing the 10,000 parts is as follows.

Direct variable manufacturing costs $ 300,000
Direct fixed manufacturing costs $ 100,000
Allocated overhead $ 50,000

If the manufacture buys the component, the direct fixed manufacturing costs can be reduced by 35 per cent. What is the maximum unit purchasing price that makes purchasing a beneficial decision in comparison to making?

 

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