Reference no: EM132735225

Malee Company has 15,000 hours of idle capacity. They need 20,000 units of a component part used in its products lines. It is estimated that each unit will take one-half machine hour for production. The following information is available.

Cost to make the parts:

Materials P14
Direct labor 18
Factory overhead (75% of direct labor cost per unit) Variable factory overhead (40% of factory overhead per unit)
Cost to buy the parts per unit from the supplier P45

If the Malee Company buys the parts rather than producing them, it will save 60% of fixed overhead cost per unit.

REQUIRED:

Problem 1: Determine the relevant unit costs.

Problem 2: Determine the relevant total costs and differential costs.

Problem 3: Should Malee Company manufacture the parts, or should it buy them from the outside supplier?