Make or Buy Terry Incorporated manufactures machine parts for aircraft engines. CEO Bucky Walters is considering an offer from a subcontractor to provide 2,350 units of product OP89 for $190,350. If Terry does not purchase these parts from the subcontractor, it must continue to produce them in-house with these costs: Direct materials Direct labor Variable overhead Allocated fixed overhead Required: Cost per Unit $ 35 25 23 4 1. What is the relevant cost per unit to make the product internally? 2. What is the estimated increase or decrease in short-term operating profit of producing the product internally versus purchasing the product from a supplier?
Make or Buy Terry Incorporated manufactures machine parts for aircraft engines. CEO Bucky Walters is considering an offer from a subcontractor to provide 2,350 units of product OP89 for $190,350. If Terry does not purchase these parts from the subcontractor, it must continue to produce them in-house with these costs: Direct materials Direct labor Variable overhead Allocated fixed overhead Required: Cost per Unit $ 35 25 23 4 1. What is the relevant cost per unit to make the product internally? 2. What is the estimated increase or decrease in short-term operating profit of producing the product internally versus purchasing the product from a supplier?
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Required information
[The following information applies to the questions displayed below.]
Each of the following situations is independent:
Make or Buy Terry Incorporated manufactures machine parts for aircraft engines. CEO Bucky Walters is considering an offer from a
subcontractor to provide 2,350 units of product OP89 for $190,350. If Terry does not purchase these parts from the subcontractor, it
must continue to produce them in-house with these costs:
Direct materials
Direct labor
Variable overhead
Allocated fixed overhead
Required:
Cost per Unit
$ 35
25
23
4
1. What is the relevant cost per unit to make the product internally?
2. What is the estimated increase or decrease in short-term operating profit of producing the product internally versus purchasing the
product from a supplier?](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F18258b8c-d303-4169-b0fe-8fc0d3c5aea2%2F20cf5e35-b66b-4827-bb9c-b487931b2d29%2Frsjksw_processed.jpeg&w=3840&q=75)
Transcribed Image Text:!
Required information
[The following information applies to the questions displayed below.]
Each of the following situations is independent:
Make or Buy Terry Incorporated manufactures machine parts for aircraft engines. CEO Bucky Walters is considering an offer from a
subcontractor to provide 2,350 units of product OP89 for $190,350. If Terry does not purchase these parts from the subcontractor, it
must continue to produce them in-house with these costs:
Direct materials
Direct labor
Variable overhead
Allocated fixed overhead
Required:
Cost per Unit
$ 35
25
23
4
1. What is the relevant cost per unit to make the product internally?
2. What is the estimated increase or decrease in short-term operating profit of producing the product internally versus purchasing the
product from a supplier?
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