Should the item be manufactured or purchased

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Reference no: EM131975956

To make a batch of 1, 000 units, it is estimated that 90 direct labor hours are required at a cost of S8 per hour.

Direct material costs are estimated at $1, 650 per batch. The overhead costs are calculated based on an overhead rate of $7.50 per direct labor hour.

The item can be readily purchased from a local vendor for $6 per unit.

a. Should the item be manufactured or purchased?

b. What is the break-even value for the overhead rate (dollars per direct labor hour)?

Assume that the material costs, labor hours, and labor costs do not change.

Reference no: EM131975956

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