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beto company pays $6.10 per unit to buy a part for one of the products it manufactures. with excess capacity, the company is considering making the part. making the part would cost $6.60 per unit for direct materials and $1.00 per unit for direct labor. the company normally applies overhead at the predetermined rate of 200% of direct labor cost. incremental overhead to make the part would be 80% of direct labor cost. (a) prepare a make or buy analysis of costs for this part. (enter your answers rounded to 2 decimal places.) (b) should beto make or buy the part?

Respuesta :

The company should buy because the cost per unit is less.

Cost per unit is 9.00

Cost difference 2.50

Overhead cost=80% of direct labor cost

= 0.80×1.00 = 0.80

Cost per unit (make)

= 7.20+1.00+0.80=9.00

Cost difference = 9.00 - 6.50= 2.50

Due to the lower cost per unit, the company should purchase.

Cost per unit is the sum of money that a business spends on making each individual unit of the product that it sells. Cost per unit is sometimes known as the cost of sales or the cost of products sold. The more profit a company can expect, the lower the production cost.

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