Purchase situation for component used in low-priced products

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Reference no: EM131561456

Answer the question. 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+50X, where X 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. If the company requires, on average, 575 items each year, should the item be purchased or manufactured?

Reference no: EM131561456

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