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

Principles of Accounting Volume 2
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ISBN:9781947172609
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Chapter6: Activity-based, Variable, And Absorption Costing
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Problem 14EA: Cool Pool has these costs associated with production of 20,000 units of accessory products: direct...
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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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