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MCS,PHD
Argosy University/ Phoniex University/
Nov-2005 - Oct-2011
Professor
Phoniex University
Oct-2001 - Nov-2016
MAKE-OR-BUY, FUNCTIONAL-BASEDÂ ANALYSIS
Watanabe Company is currently manufacturing Part NIM-06, producing 15,000 units annually. The part is used in the production of several products made by Watanabe.
The cost per unit for NIM-06 is as follows:
|
Direct materials |
$70.00 |
|
Direct labor |
20.00 |
|
Variable overhead |
3.00 |
|
Fixed overhead |
1.50 |
|
Total |
$94.50 |
Of the total fixed overhead assigned to NIM-06, $12,000 is direct fixed overhead (the annual lease cost of machinery used to manufacture Part NIM-06), and the remainder is common fixed overhead. An outside supplier has offered to sell the part to Watanabe for $94. 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 Watanabe Company make or buy Part NIM-06?
2. What is the maximum amount per unit that Watanabe would be willing to pay to an outside supplier?
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