Toronto Auto Co [TACO], has a parts division that needs 1,000 units of component CX12 per...

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Toronto Auto Co [TACO], has a parts division that needs 1,000 units of component CX12 per period in making car parts. It can buy the component for $1,250 each or make them under the following conditions: Per Unit Direct materials $ 500 250 Direct manufacturing labour Variable manufacturing overhead Fixed manufacturing overhead Total 300 250 $1,300 If TACO buys the components from outside, it can avoid 25% of fixed manufacturing overhead. Required: Part I 1. Show calculations to prove whether JACO should make or buy the component. 2. List additional non-financial factors the company should use in deciding whether to make or buy the component. 3. What are the potential dangers of outsourcing in this situation? Toronto Auto Co [TACO], has a parts division that needs 1,000 units of component CX12 per period in making car parts. It can buy the component for $1,250 each or make them under the following conditions: Per Unit Direct materials $ 500 250 Direct manufacturing labour Variable manufacturing overhead Fixed manufacturing overhead Total 300 250 $1,300 If TACO buys the components from outside, it can avoid 25% of fixed manufacturing overhead. Required: Part I 1. Show calculations to prove whether JACO should make or buy the component. 2. List additional non-financial factors the company should use in deciding whether to make or buy the component. 3. What are the potential dangers of outsourcing in this situation?

Answer rating: 100% (QA)

Part 1 1 Make or Buy Analysis To determine whether TACO should make or buy the component lets compar... View the full answer