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Company makes 40,000 units per year of a part that it uses in the products it manufactures. The unit product cost of this part is computed as follows:
Direct materials $ 11.30
Direct labour $ 22.70
Variable manufacturing overhead $ 1.20
Fixed manufacturing overhead $ 24.70
Unit product cost $ 59.90
Required
Question a. Calculate how much of the unit product cost of $59.90 is relevant in the decision of whether to make or buy the part
Question b. Calculate the net total dollar advantage (disadvantage) of purchasing the part rather than making it
Question c. Calculate the maximum amount the company should be willing to pay an outside supplier per unit for the part if the supplier commits to supplying all 40,000 units required each year
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