Reference no: EM132865075

Question - Company ABC produces 10 units of Part? #123 each month for its product? I-Phone Y. The unit cost to manufacture 1 unit of Part? #123 is:

Direct materials ? $1000/each

Materials handling? (20% of direct materials? cost) 200/each

Direct labor ? 8,000/each

Manufacturing overhead? (150% of direct? labor) ? 12,000/each

Total manufacturing cost ? $21,200/each

Materials handling represents the direct variable costs of the Receiving Department that are applied to direct materials and purchased components on the basis of their cost. This is a separate charge in addition to manufacturing overhead.

The? company's manufacturing overhead budget is? 1/3 of variable and? 2/3 fixed.

Company? XYZ, one of Company? ABC's vendors, has offered to supply the Part? #123, at a unit price of? $15,000.

Assume Company ABC is able to rent all idle capacity for? $25,000 per month.

Should Company ABC make or purchase the 10 units? What is the effect on the operating income?

What qualitative factors managers should consider when making make-or-buy decisions. List at least three items.