2.) A company currently buys a key part for a product it manufactures. The company buys the part for $5 per unit and believes it can make the part for S1.50 per unit for direct materials and $2.50 per unit for direct labor. The company allocates overhead costs at the rate of 50% of direct labor. Incremental overhead costs to make this part are S0.75 per unit. Should the company make or buy the part? Create a Total Cost per unit comparison for make or buy options.

2.) A company currently buys a key part for a product it manufactures. The company buys the part for $5 per unit and believes it can make the part for S1.50 per unit for direct materials and $2.50 per unit for direct labor. The company allocates overhead costs at the rate of 50% of direct labor. Incremental overhead costs to make this part are S0.75 per unit. Should the company make or buy the part? Create a Total Cost per unit comparison for make or buy options.

Principles of Accounting Volume 2

19th Edition

ISBN:9781947172609

Author:OpenStax

Publisher:OpenStax

Chapter10: Short-term Decision Making

Section: Chapter Questions

Problem 6PA: Gent Designs requires three units of part A for every unit of Al that it produces. Currently, part A...

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