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Should imost company have the part manufactured by the abc

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Problem 1: Annually, XYZ Division spends 65% of its direct material costs to purchase 20,000 components for its product. This component is called Part 313. iMost Company is considering making the component at their ABC division. ABC division can manufacture Part 313 with direct material and direct labor costs per unit of $0.48 and $0.54, respectively. ABC Division applies overhead at a predetermined rate of 100% of its direct labor costs. Of this rate, $0.35 relates to fixed overhead. Should iMost Company have this part manufactured by the ABC division or continue to purchase it from the outside supplier?

Reference no: EM132974293

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