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Should preston make or buy part

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Preston Industries, Inc. currently manufactures part QX100. Monthly production costs for 10,000 units of QX100 are as follows:

Direct materials                               $ 80,000

Direct labor                                     $ 20,000

Variable overhead costs                     $ 50,000

Fixed overhead costs                       $ 40,000

  • Preston's Management Accountant estimates 20% of the fixed overhead costs currently assigned to product QX100 would be saved if the company purchased the part from an outside supplier. Preston can purchase the part from an outside supplier at $16.00 per unit.

Question 1: Should Preston make or buy part QX100?

Reference no: EM132516683

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