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Granger Company makes 50,000 units per year of a part it uses in the products it manufactures. The unit product cost of this part is computed as follows:
Direct materials.......................................... P19.10
Direct labor ................................................ 21.70
Variable manufacturing overhead ............. 2.10
Fixed manufacturing overhead.................. 14.20
Unit product cost ....................................... P57.1 0
Problem 1. How much of the unit product cost of P57.10 is relevant in the decision of whether to make or buy the part?
Problem 2. What is the net total dollar advantage (disadvantage) of purchasing the part rather than making it?
Problem 3. What is the indifference point between making and buying the part? Comment on your answer.
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