Traditional analysis, Wehner Company is currently

Traditional analysis

Reference no: EM131029638

Make-or-Buy, Traditional Analysis

Wehner Company is currently manufacturing Part ABS-43, producing 55,000 units annually. The part is used in the production of several products made by Wehner. The cost per unit for ABS-43 is as follows:

Direct Materials $45.60

Direct Labor 9.80

Variable Overhead 2.75

Fixed Overhead 3.90

TOTAL $62.05

Of the total fixed overhead assigned to ABS-43, $15,400 is direct fixed overhead (the annual lease cost of machinery used to manufacture Part ABS-43), and the remainder is common fixed overhead. An outside supplier has offered to sell the part to Wehner for $58. There is no alternative use for the facilities currently used to produce the part. No significant non-unit-based overhead costs are incurred.

Required:

1. Should Wehner Company make or buy Part ABS-43?
Wehner should - Select your answer -makebuyItem 1 the part. This will produce total cost savings of $____?____ .

2. What is the maximum amount per unit that Wehner would be willing to pay to an outside supplier? Round your answer to the nearest cent.
$_____?_____ per unit

Reference no: EM131029638

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