### Gelb Company Make or Buy Analysis**Background:**Gelb Company currently produces a key component for its primary product. The costs associated with producing this part internally include direct materials, direct labor, and incremental overhead. Alternatively, the company has the option to purchase the part from an external supplier.**Cost Analysis Details:**- **Internal Production Costs:** - Direct materials: $1.30 per unit - Direct labor: $0.85 per unit - Incremental overhead: $1.44 per unit- **External Purchase Cost:** - Cost to buy the part: $3.76 per unit**Decision-Making Task:**(a) Conduct a make or buy analysis by comparing the detailed costs for both options. (Round answers to 2 decimal places.)(b) Determine whether Gelb should continue making the part internally or opt to purchase it.**Cost Comparison Framework:**| (a) Make or Buy Analysis | Make | Buy ||--------------------------|------|-----|| Direct materials | | || Direct labor | | || Overhead | | || Cost to buy | | || **Cost per unit** | | || **Cost difference** | | |**Recommendation:**(b) Based on the completed analysis, provide a recommendation on whether the company should make or buy the part.

MAKE OR BUY DECISIONThe make-or-buy decision is the choice between manufacturing a product within a…

Gelb Company currently makes a key part for its main product. Making this part incurs per unit variable costs of $1.30 for direct materials and $0.85 for direct labor. Incremental overhead to make this part is $1.44 per unit. The company can buy the part for $3.76 per unit. (a) Prepare a make or buy analysis of costs for this part. (Enter your answers rounded to 2 decimal places.) (b) Should Gelb 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

Gelb Company currently makes a key part for its main product. Making this part incurs per unit variable costs of $1.30 for direct materials and $0.85 for direct labor. Incremental overhead to make this part is $1.44 per unit. The company can buy the part for $3.76 per unit. (a) Prepare a make or buy analysis of costs for this part. (Enter your answers rounded to 2 decimal places.) (b) Should Gelb 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

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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