Beto Company pays $3.10 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 $2.10 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?

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
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Beto Company pays $3.10 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 $2.10 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 Make Buy
Direct materials
Direct labor
Overhead
Cost to buy
Cost per unit
Cost difference
(b) Company should:
Transcribed Image Text:Beto Company pays $3.10 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 $2.10 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 Make Buy Direct materials Direct labor Overhead Cost to buy Cost per unit Cost difference (b) Company should:
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