Question: Grey Inc. has been purchasing a component, Z for $85 a unit. The company is currently operating at 75% of full capacity, and no significant

Grey Inc. has been purchasing a component, Z for $85 a unit. The company is currently operating at 75% of full capacity, and no significant increase in production is anticipated in the near future. The cost of manufacturing a unit of Z, determined by absorption costing method, is estimated as follows:

Direct materials $30
Direct labor 15
Variable factory overhead 26
Fixed factory overhead 10
Total $81

Prepare a differential analysis report, dated March 12 of the current year, on the decision to make or buy Part Z.

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