Beto Company pays $5.10 per unit to buy a part for one of the products it manufactures. Withexcess capacity, the company is considering making the part. Making the part would cost $5.10 perunit for direct materials and $1.00 per unit for direct labor. The company normally applies overheadat the predetermined rate of 200% of direct labor cost. Incremental overhead to make the partwould be 80% of direct labor cost.(a) Prepare a make or buy analysis of costs for this part. (Enter your answers rounded to 2decimal places.)(b) Should Beto make or buy the part?(a) Make or Buy AnalysisDirect materialsDirect laborOverheadCost to buyCost per unitCost difference(b) Company should:MakeBuy

Answered: Image /qna-images/answer/66c4eab5-0219-4fcc-bd95-fd8502d43dbe.jpg

Answered: (a) Prepare a make or buy analysis of…

(a) Prepare a make or buy analysis of costs for this part. (Enter your answers rounded to 2 decimal places.) (b) Should Beto make or buy the part?

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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Question

Beto Company pays $5.10 per unit to buy a part for one of the products it manufactures. With
excess capacity, the company is considering making the part. Making the part would cost $5.10 per
unit for direct materials and $1.00 per unit for direct labor. The company normally applies overhead
at the predetermined rate of 200% of direct labor cost. Incremental overhead to make the part
would be 80% of direct labor cost.
(a) Prepare a make or buy analysis of costs for this part. (Enter your answers rounded to 2
decimal places.)
(b) Should Beto make or buy the part?
(a) Make or Buy Analysis
Direct materials
Direct labor
Overhead
Cost to buy
Cost per unit
Cost difference
(b) Company should:
Make
Buy

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