Lincoln Company produces a part that is used in the manufacture of one of its productsThe unit manufacturing costs of this part, assuming a production level of 5,000 units, are as follows Direct materials $3 Direct labor (variable cost) 5  Variable manufacturing overhead 4 Fixed manufacturing overhead 2 Total cost $14 Erickson Company has offered to sell 5,000 units of the same part to Lincoln Company for $13 per unit. Assuming the company has no other use for its facilities and that the fixed manufacturing costs are unavoidable , what should Lincoln Company do make it or buy it? **Show your work to support your answer

Managerial Accounting
15th Edition
ISBN:9781337912020
Author:Carl Warren, Ph.d. Cma William B. Tayler
Publisher:Carl Warren, Ph.d. Cma William B. Tayler
Chapter5: Support Department And Joint Cost Allocation
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Lincoln Company produces a part that is used in the manufacture of one of its productsThe unit manufacturing costs of this part, assuming a production level of 5,000 units, are as follows

Direct materials $3

Direct labor (variable cost) 5 

Variable manufacturing overhead 4

Fixed manufacturing overhead 2

Total cost $14

Erickson Company has offered to sell 5,000 units of the same part to Lincoln Company for $13 per unit. Assuming the company has no other use for its facilities and that the fixed manufacturing costs are unavoidable , what should Lincoln Company do make it or buy it? **Show your work to support your answer

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