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In: Accounting

Factor Co. can produce a unit of product for the following costs: Direct material $ 7.80...

Factor Co. can produce a unit of product for the following costs: Direct material $ 7.80 Direct labor 23.80 Overhead 39.00 Total costs per unit $ 70.60 An outside supplier offers to provide Factor with all the units it needs at $45.20 per unit. If Factor buys from the supplier, the company will still incur 60% of its overhead. Factor should choose to:

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Expert Solution

Factor should choose to: Buy

Working to support answer.

Total Cost of Buying $ 45.20
Total Cost of manufacturing $ 47.20
Financial advantage of buying $ 2.00

.

Per Unit Cost  
Make Buy
Direct material $                7.80
Direct labor $              23.80
Variable Overhead (39 x 40%) $              15.60
Outside purchase price $              45.20
Total Cost $              47.20 $              45.20

Unavoidable fixed cost will not be considered.

ekkarill92 answered 9 months ago
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