To make a batch of 1,000 units, it is estimated that 120 direct labor hours are required
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To make a batch of 1,000 units, it is estimated that 120 direct labor hours are required at a cost of \($10\) per hour.
Direct material costs are estimated at \($1,500\) per batch. The overhead costs are calculated based on an overhead rate of \($7.50\) per direct labor hour. The item can be readily purchased from a local vendor for \($4\) per unit.
a. Should the item be manufactured or purchased?
b. What is the break-even value for the overhead rate (dollars per direct labor hour)? Assume that the material costs, labor hours, and labor costs do not change.
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Related Book For
Principles Of Engineering Economic Analysis
ISBN: 9781118163832
6th Edition
Authors: John A. White, Kenneth E. Case, David B. Pratt
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