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Problem - X Company uses 30 units of Part A per month in the production of its main product. The manufacturing cost per unit of Part A are as follows:
Material P2,000
Handling costs 200
Direct Labor 10,000
Factory Overhead (40% fixed) 20,000
Total P32,200
Handling cost is applied at 10% of cost of direct materials and/or any purchased parts. Y Company, a producer of Part A has offered to supply the part for X at P 24,000 per unit. If X accepts Y's offer, the resulting idle facility may be used to produce another product which is expected to earn P 100,000 per month.
Required - Should the X make Part A or buy it from Y?
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