Grunar Industries produces the component parts needed for its popular non-commercial-use drones. One of the key parts has become more costly to produce than first planned, however, so management is considering outsourcing that part. If the company decides not to manufacture this part, a portion of its fixed manufacturing overhead costs would continue. The costs to produce one such part internally and to purchase on part from the suppler are given here. Complete the schedule to support the decision of whether to make or buy the part. Relevant Costs to Make Relevant Cost to Buy Costs to produce internally Direct materials Direct materials $ 2.80 Direct labor Direct labor 1.70 Variable manufacturing overhead Variable manufacturing overhead 0.50 Fixed manufacturing overhead Fixed manufacturing overhead 2.00 Total cost Cost to purchase from a supplier 6.25 Portion of fixed manufacturing cost to continue 80% Should Grunar continue to make the part or buy it from the supplier? Grunar should

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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BE5.5 - Using Excel to Evaluate a Make-Versus-Buy Decision			Student Work Area
PROBLEM		Required: Provide input into cells shaded in yellow in this template. Input the required mathematical formulas or functions with cell references to the Problem area or work area as indicated.
Grunar Industries produces the component parts needed for its popular non-commercial-use drones. One of the key parts has become more costly to produce than first planned, however, so management is considering outsourcing that part. If the company decides not to manufacture this part, a portion of its fixed manufacturing overhead costs would continue. The costs to produce one such part internally and to purchase on part from the suppler are given here.



	Complete the schedule to support the decision of whether to make or buy the part.

			Relevant Costs to Make	Relevant Cost to Buy
	Costs to produce internally				Direct materials
	Direct materials	$ 2.80			Direct labor
	Direct labor	1.70			Variable manufacturing overhead
	Variable manufacturing overhead	0.50			Fixed manufacturing overhead
	Fixed manufacturing overhead	2.00			Total cost
	Cost to purchase from a supplier	6.25
	Portion of fixed manufacturing cost to continue	80%		Should Grunar continue to make the part or buy it from the supplier?

						Grunar should

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