Northern Manufacturing wants to outsource its leather processing function for the month of November so it can renovate its buildings. Dakota Manufacturing has offered to supply Northern Manufacturing with 1,500 ft2 of processed leather for $9.50 per square feet in November so that Northern Manufacturing can continue to fulfill its regular orders. This will allow Northern Manufacturing to pause its facility and not incur any manufacturing costs for the month of November.

Upon review of Novembers production data of Northern Manufacturing, you have compiled the following information (excluding special order):

• Direct materials cost per unit = $1.36

• Labor cost per unit = $2.36

• Variable manufacturing overheads per unit = $3.00

• Variable selling overheads per unit = $2.31

• Fixed manufacturing overheads = $ 4,000

• Fixed selling overheads = $ 2,750

• Units produced and sold = 1,500 ft2

PART C (20 points): The building renovations are not urgent but Northern Manufacturing would like to see if the offer from Dakota Manufacturing is favorable. Use the information provided above to conduct a Make-Buy analysis for November and decide whether Northern Manufacturing should accept the offer from Dakota Manufacturing or not.

		Process in-house	Outsource processing
Direct materials cost per unit		$1.36
Labor cost per unit		$2.36
Variable manufacturing overheads per unit		$3.00
Variable selling overheads per unit		$2.31
Fixed manufacturing overheads		$ 4,000
Fixed selling overheads		$ 2,750
Units		1,500 ft^2
Northern Manufacturing
Make-Buy Analysis
October 31, 20X1
		Status Quo:	Alternative:
		Process in-house	Outsource processing	Difference
Direct materials costs				$ -	-
Labor costs				$ -	-
Variable manufacturing overheads				$ -	-
Variable selling overheads				$ -	-
Fixed manufacturing overheads				$ -	-
Fixed selling overheads				$ -	-
Total Costs				$ -	-