How to make-versus-purchase situation for a component

Reference no: EM13175695

A night vision goggle manufacturer is evaluating a make-versus-purchase situation for a component used in its low-priced products. The component can be purchased at a variable wholesale price of P=1200+50y where y is the number of items. Alternatively, the component can be produced with a direct material cost of $17 per item, and direct labor cost of $38 per item. The manufacturing overhead is allocated at 150% of direct labor cost per item. How much will it cost to purchase the component if the company requires on average 159 items each year?

Reference no: EM13175695

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