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Recher Corporation uses part Q89 in one of its products. The company's Accounting Department reports the following costs of producing the 7,400 units of the part that are needed every year.
Per Unit
Direct materials$8.10
Direct labor$4.40
Variable overhead$8.60
Supervisor's salary$3.20
Depreciation of special equipment$2.60
Allocated general overhead$1.30
Required:
Question a. Prepare report that shows the financial impact of buying part Q89 from the supplier rather than continuing to make it inside the company.
Question b. Which alternative should the company choose?
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