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?
Chapter10: Short-term Decision Making
Section: Chapter Questions
Problem 7PB: Remarkable Enterprises requires four units of part A for every unit of Al that it produces....
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