A company is analyzing a make-versus-purchase situation for a component used in several products, and the engineering department has developed these data Option A: Purchase 10,000 items per year at a fixed price of $9.31 per item. The cost of placing the order is negligible according to the present cost accounting procedure. Option B: Manufacture 10,000 items per year, using available capacity in the factory. Cost estimates are direct materials $5.16 per item and direct labor $1.57 per item. Manufacturing overhead is allocated at 200% of direct labor ($3.14 per item). Based on these data, should the item be purchased or manufactured? CITD The total cost of Option A is $. (Round to the nearest dollar.) The total cost of Option B is $. (Round to the nearest dollar.) Should the item be purchased or manufactured? Choose the correct answer below. O The item should be manufactured. O The item should be purchased.

A company is analyzing a make-versus-purchase situation for a component used in several products, and the engineering department has developed these data Option A: Purchase 10,000 items per year at a fixed price of $9.31 per item. The cost of placing the order is negligible according to the present cost accounting procedure. Option B: Manufacture 10,000 items per year, using available capacity in the factory. Cost estimates are direct materials $5.16 per item and direct labor $1.57 per item. Manufacturing overhead is allocated at 200% of direct labor ($3.14 per item). Based on these data, should the item be purchased or manufactured? CITD The total cost of Option A is $. (Round to the nearest dollar.) The total cost of Option B is $. (Round to the nearest dollar.) Should the item be purchased or manufactured? Choose the correct answer below. O The item should be manufactured. O The item should be purchased.

Managerial Economics: Applications, Strategies and Tactics (MindTap Course List)

14th Edition

ISBN:9781305506381

Author:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris

Publisher:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris

Chapter8: Cost Analysis

Section: Chapter Questions

Problem 5E

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