1.King Corp., uses 10,000 units of Part X to be used in its production cycle.King can make...
Question:
1.King Corp., uses 10,000 units of Part X to be used in its production cycle.King can make or buy Part X. If King buys the part from Utica Company, King could not use the released facilities in another manufacturing activity therefore 60% of the fixed overhead applied will continue whether Part X is bought from Utica or manufactured by King. The following per-unit cost information to make the part by King is available:
Direct materials $6
Direct labor 24
Variable overhead 12
Fixed overhead applied 15
$57
Cost to buy the part from Utica company $53
a.Should King Make or Buy Part X?Show and label your support calculations.
b.Identify one important strategic factor King should consider when making decisions about outsourcing work to other companies?
Expert Answer:
a To determine whether King should make or buy Part X we need to compare the costs of making the par... View the full answer
