Question

Will Company assembles products from a group of interconnecting parts. The company produces some of the parts and buys some from outside vendors. The vendor for Part X has just increased its price by 35 percent, to $10 per unit for the first 5,000 units and $9 per additional unit ordered each year. The company uses 7,500 units of Part X each year. Unit costs if the company makes the part are as follows.
Direct materials ................... $3.50
Direct labor .................... 2.00
Variable overhead .................. 4.00
Variable selling costs for the assembled product ....... 3.75
Should Will Company continue to purchase Part X or begin making it?



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  • CreatedMarch 26, 2014
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