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Producing one of its products. If Eggers buys the part from McMillan Company for $100 instead of making it, Eggers will not use the released facilities in another manufacturing activity. Forty percent of the fixed overhead will continue irrespective of CEO Donald Mickey's decision.
The cost data are as follows:
Cost to make the part:
Direct materials $40
Direct labor 17
Var overhead 25
Fixed overhead 20
TOTAL $102
Problem 1: Which alternative is more attractive to Eggers, and by what amount
Problem 2: What is the cost savings per unit for your selection?
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