Yuri Company has been purchasing $50,000$ units of component, Part X$92,$ for $$45$ per unit. Yuri is currently operating at $70\%$ capacity, and no significant increase in production is anticipated soon. The cost of manufacturing a unit of Part X$92$ is estimated as follows for $50,000$ units:

Direct materials $$26\mathrm{.}00$

Direct labor $10\mathrm{.}00$

Variable factory overhead $3\mathrm{.}00$

Fixed factory overhead $($$$125,000$ will be saved if purchased$)8\mathrm{.}30$

Total $$47\mathrm{.}30$

a$.$ Should Yuri Company buy part X$92$ externally or make them internally? Prepare a differential analysis to support your decision.

b$.$ If Yuri Company can rent the production facility to Harris Company for $$130,000$ when they purchase part X$92$ externally, should Yuri Company buy part X$92$ externally or make them internally? Prepare a differential analysis to support your decision.

Answer rating: 100% (QA)

Answer a To determine whether Yuri Company should buy part X92 externally or make them internally we ... View the full answer