Should the company buy or manufacture?

Principles of Accounting Volume 2
19th Edition
ISBN:9781947172609
Author:OpenStax
Publisher:OpenStax
Chapter6: Activity-based, Variable, And Absorption Costing
Section: Chapter Questions
Problem 14EA: Cool Pool has these costs associated with production of 20,000 units of accessory products: direct...
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Part Y is a component that Xia Inc uses in the assembly of its motors. The cost to produce one unit of part Y are as follows: DM of 4,000; Materials handling (20% of DM) is 800; DL cost of 32,000 and OH cost of 150% of DL cost. Materials handling is not included in the Mfg OH, it represents the direct variable cost of receiving department that are applied to Direct materials and purchased components from supplier on the basis of their cost. The company’s annual budget for OH is 2/3 fixed. Zia Group of Companies offers a price of 60,000 per unit. Should the company buy or manufacture?

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