Prepare make/buy analysis showing annual advantagadvantage

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Reference no: EM131292035

Lindon Company uses 10,000 units of Part Y each year as a component in the assembly of one of its products. The company is presently producing Part Y internally at a total cost of $100,000 as follows. Direct materials............................................... $20,000 Direct labor...................................................... 40,000 Variable manufacturing overhead...................... 16,000 Fixed manufacturing overhead....................... 24,000 Total costs.......................................................100,000 An outside supplier has offered to provide Part Y at a price of $10 per unit. If Lindon stops producing the part internally, one third of the fixed manufacturing overhead would be eliminated. Required: Should Lindon Company make or buy the part? Prepare a make-or-buy analysis showing the annual advantage or disadvantage of accepting the outside supplier's offer.

Reference no: EM131292035

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