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Should numbers make or buy the components

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Reference no: EM132715585

A company is trying to decide whether it should continue to produce an engine component or buy it from supplier for P2,100 each. Demand for the coming year is 20 units. The costs of producing a single unit of the engine component are as follows:

Direct labor 900

Direct materials P1,200

Factory overhead (75% fixed) 1,000

If the company buys the components, the facility now used to make the components can be rented out to another firm for P6,000.

Required:

Question 1. Should Numbers make or buy the components?

Question 2. How much is the difference between the cost of making or buying the components?

Reference no: EM132715585

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