HW: Ch 7 6. 14.28 polnts Exercise 7-10 Make or Buy a Component [LO7-3) For many years Futura Company has purchased the starters that it installs in its standard line of farm tractors. Due to a reduction in output the company has idle capacity that could be used to produce the starters. The chief engineer has recommended against this move, however pointing out that the cost to produce the starters would be greater than the current $10.90 per unit purchase price Per Unit Total $ 5.00 Direct materials Direct labor Superv 2,80 160 $112,000 1.40 S 98,000 0 40 0.50 S 35,000 Variable manufacturing overhead Rent Total product cost S 11.70 A supervisor would have to be hired to oversee production of the starters. However,th that no new equipment would have to be purchased. company has sufficient idle tools and machinery so The rent charge above is based on space utilized in the plant. The total rent on the plant s $81,000 per period Depreciation is due to obsolescece rather than wear and tear Required: 1. Determine the total relevant cost per unit if starters are made inside the company Relevant cost per unit HW: Ch 7