Dana Corporation, based in Toledo, Ohio, is a global manufacturer of highly engineered products that serve industrial, vehicle,
construction, commercial, aerospace, and semiconductor markets. It frequently subcontracts work to other manufacturers,
depending on whether Dana's facilities are fully occupied. Suppose Dana is about to make some financial decision regarding the use
of its manufacturing facilities for the coming year.
The following are the costs of making part EC113, a key component of an emissions control system:

Manufacturing Costs for 65,000 units	Total costs	Cost per unit
Direct material	520,000	8.00
Direct labor	715,000	11.00
Variable factory overhead(OH)	585,000	9.00
Fixed factory overhead(OH)	195,000	3.00
Total manufacturing costs	2,015,000	31.00

Another manufacturer has offered to sell the same part to Dana for $28 each. The fixed factory overhead consists of depreciation,
property taxes, insurance, and supervisory salaries. $100,000 out of $195,000 fixed factory overhead costs would continue,
which is unavoidable, even if Dana bought the component.

1. Assume that the capacity now used to make parts will become idle if the parts are purchased.
Construct the decision model with the relevant cost information to compare the Make the case and Buy a case.
	Make		Buy
Relevant (Avoidable) costs	Total	per Unit	Total	per Unit

2. Assume that the capacity now used to make parts will either (a) be rented to a nearby manufacturer for the rental
income of $35,000 for the year but Dana corp. should pay a brokerage fee of $15,000 for the deal, or (b) be used to make oil filters
that will yield a profit contribution of $20,000 but require $10,000 additional fixed costs.
Construct Incremental Analysis Model with the relevant information in the box.
Incremental Analysis.	Make	Buy and Leave facilities idle	Buy and Rent out Facilities	Buy and Use facilities for oil filters

3. Which operational decision among the four alternatives should you as a manager make? Why?

Answer rating: 100% (QA)

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