Wehner Company is currently manufacturing Part ABS-43, producing 53,400 units annually. The part is used in the production of several products made by Wehner. The cost per unit for ABS-43 is as follows:

Direct materials $45.30

Direct labor 8.05

Variable overhead 3.45

Fixed overhead 4.80

Total $61.60

Of the total fixed overhead assigned to ABS-43, $14,365 is direct fixed overhead (the annual lease cost of machinery used to manufacture Part ABS-43), and the remainder is common fixed overhead. An outside supplier has 

offered to sell the part to Wehner for $56.69. There is no alternative use for the facilities currently used to produce the part. No significant non-unit-based overhead costs are incurred.

 

Required:

1.Should Wehner Company make or buy Part ABS-43?

Wehner should buy the part. This will produce total cost savings of $.

2.What is the maximum amount per unit that Wehner would be willing to pay to an outside supplier? Round your answer to the nearest cent.

$per unit

Answer rating: 100% (QA)

To determine whether Wehner Company should make or buy Part ABS43 we need to compare the cost of pro... View the full answer