Maurice Tutor

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Category > Management Posted 07 Oct 2017 My Price 5.00

cost of placing

A company is analyzing a make-versus-purchase situation for a component used in several products, and the engineering department has developed these data:

 

Option A: Purchase 10,000 items per year at a fixed price of $8.50 per item. The cost of placing the order is negligible according to the present cost accounting procedure.

Option B: Manufacture 10,000 items per year, using available capacity in the factory. Cost estimates are direct materials = $5.00 per item and direct labor = $1.50 per item. Manufacturing overhead is allocated at 200% of direct labor (= $3.00 per item). Based on these data, should the item be purchased or manufactured?

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Maurice Tutor
(5)
Status NEW Posted 07 Oct 2017 10:10 PM My Price 5.00

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