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Thunder company has been producing 15000 units of part 3741 for its products. The unit cost for the part is as follows:
Direct materials - $7 Direct Labour - 13Variable manufacturing overhead - 9 Fixed manufacturing overhead - 10Total - $39
Thunder can purchase 15000 units of part 3741 for $34 each. If the part is purchased, Thunder can make another product and provide a contribution margin of $15000. If the part is purchased, 75% of the fixed manufacturing overhead costs will be still incurred.
Required:
Problem 1: Should Thunder make or buy the part?
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