SE3. Will Company assembles products from a group of interconnecting parts. The com- pany produces some of the parts and buys some from outside vendors. The vendor for Part X has just increased its price by 35 percent, to $10 per unit for the first 5,000 units and $9 per additional unit ordered each year. The company uses 7,500 units of Part X cach year. Unit costs if the company makes the part are as follows. Direct materials $3.50 Direct labor 2.00 Variable overhead 4.00 Variable selling costs for the assembled product 3.75 Should Will Company continue to purchase Part X or begin making it?
SE3. Will Company assembles products from a group of interconnecting parts. The com- pany produces some of the parts and buys some from outside vendors. The vendor for Part X has just increased its price by 35 percent, to $10 per unit for the first 5,000 units and $9 per additional unit ordered each year. The company uses 7,500 units of Part X cach year. Unit costs if the company makes the part are as follows. Direct materials $3.50 Direct labor 2.00 Variable overhead 4.00 Variable selling costs for the assembled product 3.75 Should Will Company continue to purchase Part X or begin making it?
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Please answer the following
Transcribed Image Text:SE3. Will Company assembles products from a group of interconnecting parts. The com-
pany produces some of the parts and buys some from outside vendors. The vendor for
Part X has just increased its price by 35 percent, to $10 per unit for the first 5,000 units
and $9 per additional unit ordered each year. The company uses 7,500 units of Part X
each year. Unit costs if the company makes the part are as follows.
Direct materials
$3.50
Direct labor
2.00
Variable overhead
4.00
Variable selling costs for the assembled product
3.75
Should Will Company continue to purchase Part X or begin making it?
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