The following is a product cost report for component A-103. The firm has received a bid to supply all needed units for $32 per unit and must decide whether to accept the bid or continue making the product. The firm has sought your help in this decision, particularly because current capacity utilization is only 40% of available capacity. The firm will need the component for six more months; the new model of its product contains a redesigned component. The firm€™s accountant tells you that the decision to make or buy the component will not affect the firm€™s total outflow for fixed overhead costs.


Required:
Should the firm make or buy component A-103 for the next sixmonths?

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Materials Direct labor Variable overhead Fixed overhead Total $12.00 per unit 9.00 4.50 9.00 50% of labor cost 100% of labor cost $34.50 per unit.